Lenders usually assess a couple’s incomes together, so a big gap between your pay and your partner’s is not a barrier in itself. What matters is the combined income that can be verified, minus your shared debts, living costs and dependants. There is normally a path to a workable loan, but how both incomes are documented and how stable they look can change the outcome.
Both incomes are usually counted, not just the higher one
When two people apply for a loan together, many lenders add the eligible income of both applicants and then deduct commitments and living expenses. The lower earner’s income is not ignored, and the higher earner’s income is not discounted just because the other is smaller.
The gap matters in other ways. If one partner’s income is casual, commission-based, seasonal or recently started, lenders may treat that portion more cautiously than a steady salary. A large income and a small income can both be assessed fairly, as long as each is clearly evidenced.
Serviceability: the test behind borrowing power
Lenders test whether you could keep up repayments if your circumstances became tighter than they are today. They normally add a buffer to the repayment they assess, and they compare the result with your combined income after expenses.
Several things reduce how much you may be able to borrow, whoever earns more:
- Credit card limits, even when the balance is zero, because lenders commonly assess the limit.
- Personal loans, car loans and buy-now-pay-later accounts.
- HELP or HECS debt, which reduces take-home pay.
- Dependants, which lift the living costs lenders assume.
- Other property debt held by either partner.
Closing unused cards and lowering limits before applying often helps. Do it in consultation with a broker, so the timing suits your application.
Why one partner’s debts affect both of you
If you both go on the loan, lenders look at the whole household position. A personal debt that only one partner holds is usually still counted against the joint application. A partner with a strong income and a heavy debt load may reduce borrowing power more than expected, while a partner with a modest income and a clean record may help the application.
Credit history is assessed per person. If one partner has defaults or missed payments, some lenders will look closely at the circumstances, and others may decline. This is one reason lender choice matters, because policies differ considerably.
Should only one partner be on the loan?
Some couples consider putting the loan in the higher earner’s name alone. This can sometimes simplify an application, but it is not always better. The lower earner’s income would then not count towards borrowing power, and a lender may still want to understand the household’s expenses and the other partner’s role.
Loan structure is separate from ownership. Who is on the title can affect things such as stamp duty concessions, first home buyer eligibility, land tax and what happens if the relationship ends. Because these rules differ between states and territories, it is worth getting advice from a conveyancer or solicitor before deciding.
Some people also use a family guarantee. In that arrangement a parent or close relative offers security to help with a smaller deposit. It has real risks for the guarantor, so it needs independent legal advice.
Deposit, LVR and government schemes
A deposit smaller than 20 percent of the purchase price usually means lenders mortgage insurance, unless a scheme or a lender policy applies. A larger deposit lowers your loan-to-value ratio (LVR) and often widens your options.
If you are first home buyers, government schemes may help with a smaller deposit or with stamp duty. Eligibility rules, including income and price limits, can differ by scheme and by state, and they change. Check the current conditions with the relevant government body or ask your broker. When two incomes are very different, you will usually need to confirm how the scheme treats a couple’s combined income.
How to prepare before you apply
- Gather recent payslips, tax returns and bank statements for both of you.
- If one of you is self-employed, expect lenders to ask for tax returns and notices of assessment, and sometimes more.
- If one partner is returning from parental leave or changing jobs, ask a broker how lenders may treat that income.
- Track your spending honestly. Lenders compare your stated expenses with your account history.
- Keep your savings pattern steady in the months before applying.
Preparing this way helps you understand your position and presents both incomes in the best accurate light.
If you are buying with a partner and your incomes are very different, a conversation early on can save a lot of guesswork. You can book a free consultation at https://booking.easyloanfinance.com.au and we can talk through your situation.
General information only, not credit advice, and not an offer of finance or a promise of loan approval. Rules and costs change and vary by state — confirm current requirements for your situation. Ryan Vu is a Credit Representative (CRN 568863) of Beagle Finance Pty Ltd, Australian Credit Licence 383640.
