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$100K p.a. single or $150K p.a. dual income - borrowing capacity

Discussion in 'Property Finance' started by Taku Ekanayake, 5th Sep, 2015.

  1. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Hey guys,

    I'm curious to find out, if all things being equal apart from the monthly expenses (in reality, a single person would have nearly half the amount of expenses as a couple), who would have the better borrowing capacity from lenders:
    A single person on a $100K income or couple with $150K combined income?

    Second part to the question:
    At what point, in terms of salary, would the single person's borrowing capacity, and the couple's borrowing capacity equally meet?

    I hope this question makes sense to you.


    Cheers,

    Taku
     
  2. Coota9

    Coota9 Well-Known Member Premium Member

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    Sounds like a question for @Redom to answer
     
  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    A couple earning $150,000 is generally going to service stronger but this of course depends a lot of other factors like negative gearing benefits that can be applied to each applicant, etc.

    The correlation between the 2 is quite similar. So approximately $200,000 p/a in income is equivalent to about $190,000 in income for a couple.
     
  4. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Hey @Shahin_Afarin
    Thanks for the feedback.
    Can you explain the quoted sentence?

    I'm a little confused here.


    Cheers,

    Taku
     
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    So the total incomes would need to be close together - again is the single applicant is earning $100k then this would equate to a couple earning $50k each.

    What will skew this figure is other bits and pieces like negative gearing and tax rate thresholds.
     
  6. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    So does expenses not play a huge role in borrowing capacity?
    A single person may have $1000/month in expenses, whereas a couple may have $1750/month in expenses?
    Hence, even though a single person has less overall income, their expenses are significantly lower.
     
  7. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    The living expense is higher but the tax thresholds are different as well. So the single guy earning $100k is getting tax more than the couple making $50k each. This is what I was referring to in the previous post in that tax rate thresholds amongst other things skew and change the figures.
     
    Taku Ekanayake likes this.
  8. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Ahh k right, I get this now. Thanks for clarifying @Shahin_Afarin.
    I never took into consideration the tax threshold.

    Wow so the single person would actually have to make more that the couple to have same borrowing capacity - wow.