I recently read that many millennials are putting off marriage to buy their first home. This made me think about all of the clients I’ve dealt with over the past 10 years and how many have had to make the decision about buying property before or after having kids.
Having a beautiful daughter of my own and another baby on the way, we were fortunate enough to be able to purchase a home before kids. There is no right or wrong answer as to what you should or shouldn’t do, as personally, having kids is the best thing I’ve ever done. However, my job is to educate people on the facts around how lenders will assess you as a couple compared to a couple with a child.
If you and your spouse have a joint income of $150,000, with no other debts and a $15,000 credit card limit between you, then your borrowing capacity is approx. $900K. This would normally be plenty for the average first homebuyer.
Fast forward to having a baby, now a lender factors in a dependant and can add approx. $400 to your monthly living expenses. In the likely event that one of the parents takes time off work there are some consequences. If the working parent was earning $80,000 per annum, then their combined borrowing capacity would be around $300,000. In the situation where the working parents income was $120,000, then their combined borrowing capacity would be around $500,000 – $550,000.
Lenders don’t factor in maternity or paternity leave income as they know it’s short lived. If you aren’t able to borrow what you need on one income, then you may have to wait until both parents are back at work. Depending on the situation, one parent may only go back part time, and this needs to be considered.
If you are a young couple thinking about buying and have kids on the horizon feel free to send us an email or give us a call on 03 9421 1651. Our team are very experienced having worked with countless clients in this very position.