Ask Susan: Can a Single Mom Buy a Home?

RNZ financial reporter Susan Edmonds.
photo: Royal Bank of New Zealand

Do you need urgent help with a money problem? Please send an email susan.edmunds@rnz.co.nz

My 30-year-old daughter is a single mother of three, will she qualify for a home loan? She earns $800 a week and works four days. I would give her $25,000 as a deposit. She has no KiwiSaver.

I took your figures to mortgage broker Glen Mcleod to see what was possible.

Generally speaking, when buying a home, it is important to have enough savings to qualify for a loan, as well as enough income to repay the loan.

Your daughter might be able to get a first mortgage for 95% of the purchase price of her home. In this sense, a $25,000 deposit could allow her to purchase a $500,000 home.

But the key issue here is her income. McLeod said she earns $800 a week after taxes and can only borrow about $210,000.

But if she also receives Working Families Supplement for her three children, her after-tax income might be $1250 a week, which would allow her to borrow about $420,000. Depending on where she lives, that might be enough to house her and her children.

Will she still get child support? Any increase in income will affect her.

I suggested that she seek advice to see what might be possible. It’s hard to get a clear picture without all the details, but if that is her goal, an advisor can help her process her financial situation and determine what she needs to do to get on track to buying a home.

I have been unable to get a clear answer: New Zealander Bob sells Fisher & Paykel Healthcare shares that he had held for over twenty years, but had never traded despite accumulation. The total amount should not be taxed. He is risking his bank deposits but is concerned that he may lose it all. So Bob starts buying back shares at a price lower than the previous sale price. He accumulates roughly the same number of shares. Should Bob pay tax on the gains he makes?

I sent this question to Robyn Walker, a tax partner at Deloitte.

She said that, assuming that Bob wasn’t buying and selling stocks on a scale that could be considered a business, he needed to consider his intentions each time he bought a stock.

“Whenever he buys a batch of shares, is he doing so primarily with the intention of selling them? The thing to consider here is, why is Bob buying these shares? Could it be because he wants to receive regular dividends, make a long-term investment, have voting rights, as a store of value – something to inherit as an inheritance for a family member, or could it be because he predicts that the share price will go up and he wants to earn a gain, which can only be achieved by selling?

“Bob should document his intentions and thought process at the time of the acquisition. But he should be aware that the IRD can test his claims based on objective factors such as what actually happened – for example, if he says he invested in a company with no dividend history for the purpose of receiving dividend income, the IRD may challenge that. The outcome will depend on the facts of each case.”