Ask Paul: I’m a single mum, can I afford to buy a home?

Dear Paul,

I'm a 34-year-old single mum with a 15-year-old who attends a private school. I earn $80,000-plus a year and receive child maintenance of $650 a fortnight and a government payment of $135 a fortnight, which will end once my teenager turns 18. I have no credit cards or loans. 

I sold the family home in 2021 and placed my profit from the sale into a savings account.

My belongings are in storage at a cost of $640 a month and I pay $320 a week in rent. I own two cars, have $540,000 in savings, $23,000 invested in shares and $22,000 in superannuation. 

I'm struggling with deciding on where to invest my money and how to plan for my future.

I'm wondering if I should buy a small property outright or purchase a more expensive home in a more sought-after area with a mortgage. I'm saving around $1000 a fortnight. Any advice would be so helpful. - Pia

Putting that aside, you are doing really well to save $1000 a fortnight - around $26,000 a year - and after you pay school fees, costs for two cars, rent and all the usual lifestyle costs, it is a really significant amount. Along with your savings, it gives you terrific options.

You are young - at age 34 you have many decades in front of you. So, providing your income comes from a secure job or another secure source, I would argue that owning a home is a great move for you.

Add your rent into your saving capacity, plus the $640 a month for furniture storage, and you have the capacity to fund a pretty good-sized mortgage. So, from what you have told me, if I was in your shoes, I'd be buying a good house in a good suburb that was likely to be my long-term home.

But I don't know a lot about you. Obvious questions that pop into my mind are what are your plans once your child finishes school? What might happen in terms of you having a new partner?

In fact, I have a list of questions I would want to ask you to think about before you bought a new home. The good news is you can earn more than 4% on your savings in a safe term deposit while you ensure your plans are reasonably settled.

So, while I think a good home would provide you somewhere to live with your child and be a good long-term asset for you, my advice would be to think about your medium to long-term plans.

My overriding view, though, is that buying a family home, providing you can comfortably afford the mortgage repayments, is the way to go. If you moved away after your child completed school, you could always rent it.

I have a strong bias towards home ownership. While this must fit with your plans, I feel it is an important goal for you.

Get stories like this in our newsletters.