Re: How do banks calculate my living expenses?
Posted: Wed Dec 26, 2018 5:06 pm
Hi KHATREE,
All banks view your living expenses while assessing your home loan application apart from other factors such as savings, income and employment. They will take all of your basic living expenses into consideration such as child care, personal care, insurance, utilities, connections and transport expenses.
Banks calculate your borrowing capacity and see if you can make regular repayments on your home loan.
Before 2012, lenders used the Henderson Poverty Index (HPI) but then most switched to the Household Expenditure Method (HEM) for calculating your living expenses, which offers a more realistic figure for living expenses.
Usually, banks have up to 13 categories they require you to provide accurate expense details for. All the big 4 banks - Westpac, ANZ, CBA and NAB - are very much reliant on the HEM when appraising living expenses.
Nowadays, banks not only rely on the HEM. They ask for additional information and supporting documents to give an “accurate view” of your expenditure. If you apply with a broker, you are required to have a discussion with your mortgage broker to make sure you correctly complete this section of the lender’s fact-finding.
Please discuss it directly with one of our experienced mortgage brokers on 1300 889 743 if you're worried about the impact of living expenses on your borrowing power.
Cheers,
All banks view your living expenses while assessing your home loan application apart from other factors such as savings, income and employment. They will take all of your basic living expenses into consideration such as child care, personal care, insurance, utilities, connections and transport expenses.
Banks calculate your borrowing capacity and see if you can make regular repayments on your home loan.
Before 2012, lenders used the Henderson Poverty Index (HPI) but then most switched to the Household Expenditure Method (HEM) for calculating your living expenses, which offers a more realistic figure for living expenses.
Usually, banks have up to 13 categories they require you to provide accurate expense details for. All the big 4 banks - Westpac, ANZ, CBA and NAB - are very much reliant on the HEM when appraising living expenses.
Nowadays, banks not only rely on the HEM. They ask for additional information and supporting documents to give an “accurate view” of your expenditure. If you apply with a broker, you are required to have a discussion with your mortgage broker to make sure you correctly complete this section of the lender’s fact-finding.
Please discuss it directly with one of our experienced mortgage brokers on 1300 889 743 if you're worried about the impact of living expenses on your borrowing power.
Cheers,