Last Updated: 31st May, 2021

After his divorce, police officer Matt wanted to start a new chapter on New South Wales’ south coast.

Unfortunately, he hit a snag with his home loan borrowing power because of the bank’s approach to assessing his living expenses.

The story

Starting over

After separating from his wife and selling their home, Matt wanted to start fresh and buy a home closer to where he was stationed in Sussex Inlet.

Luckily, he was able to use the proceeds from the sale of his home as a deposit.

He finds a newly-renovated 3-bedroom house in a quiet cul-de-sac just waiting to be snapped up and applies for pre-approval.

The property is considered to be a Category 2 or regional property by some Lenders Mortgage Insurers which is considered a higher risk than a metro location.

However, the property was valued at $375,000 which meant he could still potentially borrow up to 95% of the property value (try the postcode calculator to find out more).

Matt also had a secure job with a regular income, a clear credit file and two investment properties in his name that he had been making perfect mortgage repayments on.

He didn’t think he’d have any trouble getting mortgage approval.

Matt’s living expenses are too high!

Unfortunately for Matt, ANZ knocks back his application because they limit his home loan borrowing power to $170,000.

What happened?

Like other banks, ANZ base their living expenses assessment on the House Expenditure Measure (HEM).

The problem is that HEM tends is based on borrowers living in metropolitan areas, which tend to have higher basic living costs than regional areas.

His property in Sussex Inlet was considered to be a semi-rural location yet ANZ was using the higher of Matt’s declared living expenses and HEM.

By not factoring in his postcode and location, Matt was declined on the spot.

The solution

Find a new lender

Matt made the smart choice and spoke with Home Loan Experts mortgage broker Robert Mo.

Robert quickly recognised that some lenders consider your postcode when assessing your monthly expenses.

He was able to get Matt approved with Firefighters Mutual Bank who approved him at a much higher loan amount of $400,000.

The lender also offered him a comparable rate to ANZ and they even considered 100% of Matt’s overtime income as a police officer to further maximise his borrowing power.

Matt now had enough to complete the purchase.

A happy ending

Matt is now enjoying his south coast lifestyle while continuing to serve in the police force.

He’s closer to home, didn’t have to settle for renting out a unit and continues to receive rental income from his two investment properties.