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

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

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  1. Taku Ekanayake

    Taku Ekanayake Mortgage Broker @KinFinancial Business 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 Mortgage Broker @KinFinancial Business 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 Mortgage Broker @KinFinancial Business 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 Mortgage Broker @KinFinancial Business 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.