Estimating Borrowing Power for Dual-Income Homebuyers in Victoria

Estimating your borrowing capacity is a critical first step when you’re planning to purchase a home. For dual‐income couples in Victoria, leveraging both salaries and existing equity can significantly boost your buying power. Below is an illustrative scenario for a couple with a combined gross income of $200,000 and an established property.

1. Property and Financial Snapshot

Current Property: Purchased for $500,000 in 2020; current market value $675,000
Mortgage Outstanding: $400,000
Available Equity: $275,000 total; approximately $140,000 usable (80% LVR)
Offset Account Savings: $50,000
Combined Gross Income: $200,000 ($100,000 each)
Monthly Mortgage Repayments: $2,600
Credit Card Limit: $10,000

2. Borrowing Power Estimation

Net Monthly Income: ~$12,917
Assumed Household Expenses (HEM): $4,000
Existing Liabilities: $2,600 (mortgage) + $300 (credit card minimum)
Surplus Income for New Repayments: ~$6,017 per month

Assuming a 30-year loan at a buffer interest rate of 8.5% (repayment factor ~$768.70 per $100,000), this surplus suggests a borrowing capacity of around $780,000.

3. Total Purchasing Power

Deposit Funds: $190,000 (usable equity + savings)
Maximum Purchase Price (80% LVR): ~$970,000
New Loan Repayments: ~$4,678/month (at 6% interest over 30 years)
Total Monthly Debt Service: ~$7,278 (existing + new loans)

4. Key Considerations

Lenders Mortgage Insurance (LMI): Avoid by keeping LVR at or below 80%
Stamp Duty and Fees: Estimate $25,000–$50,000 in Victoria
Debt-to-Income (DTI) Ratio: Approximately 5.9 – within acceptable lender thresholds
Pre-Approval: Recommended to confirm exact borrowing limits and loan terms

5. Final Thoughts

With strategic use of equity and combined incomes, this couple could target a home approaching $1 million while keeping repayments manageable. Lender policies vary, so it’s wise to consult a mortgage broker or use specific bank calculators for a tailored assessment.