Last Updated: 31st May, 2021

If your monthly spending is high, a living expenses reduction letter can help to improve your home loan borrowing power.

The key to approval is to be honest with your spending and identify “reasonable” reductions.

Living expenses reduction letter template

This living expenses reduction letter template is generally acceptable to most lenders.

We commit to reduce our discretionary living expenses. Our living expenses will now be:

See here for list of living expense categories

This is a reasonable reduction that was made without affecting our basic living expenses. This was achieved by doing the following:




These are the following special circumstances regarding our living expenses:




Sign / Date / Name.

Call us on 1300 889 743 or fill in free enquiry form if you’ve been knocked back for a home loan because of your living expenses.

What are reasonable reductions?

A living expenses reduction letter can either save your application or see you declined depending on what you list as reasonable reductions.

The following are examples of acceptable reductions:

  • Cancelling your gym memberships.
  • Reducing your spending takeaway such as $20 per week.
  • Switching to home cooked meals.
  • Changing the brands you buy when shopping.
  • Going to the movies once a month as opposed to every week.
  • Reducing your spending at pubs, clubs and restaurants.
  • Reducing your spending at the shopping mall such as clothing and entertainment and technology outlets.
  • Cutting paid subscriptions such as multiple streaming services and cable television providers.
  • Cutting out online purchases for such as retail and online gaming purchases.

What are unreasonable reductions?

Reducing your spending in areas that are considered to be part of your basic living costs are generally unnacceptable.

These expenses relate to:

  • Medical and health: This is particularly true if you have an existing condition or your have dependent children.
  • Investment property: The only exception generally is if you’re in the process of selling your investment property, at which point the property will no longer be an expense.
  • Education: This includes professional development courses that your employer is not covering and, particularly, if you have school age children.
  • Childcare: The only exception is if you will soon have an arrangement in place to have your parents or a relative babysit a couple of times a week.

What are considered special circumstances?

Your declared living expenses may be high but they don’t really paint the entire picture of your situation. How do you prove this to your bank?

It depends on your situation.

For example, your business may pay for such expenses as your mobile phone and internet plan, your uniform and tools, your car, or even pay for your rent, particularly if you’re a Fly-In Fly-Out (FIFO) worker.

In other cases, you may be living in South East Asia or a country where your living expenses are compartively lower compared to Australian standards.

Explain your situation to your mortgage broker and they will let you know whether if it is considered acceptable to the bank

Don’t lie on your reduction letter

It’s common for borrowers to underestimate their monthly expenditure by mistake.

However, others do this intentially because they believe that this will improve their borrowing power so they can afford the amount they want to borrow.

Whether it’s intentional or not, underestimating your spending will not improve your borrowing power and here’s why: banks will check your declaration against your transaction and bank statements.

There’s no hiding or attempting to paint a better picture of your spending because it’s there for the banks to see.

Read more tips about completing a monthly expenditure declaration.

Need help applying for a home loan?

Lenders are getting tougher when it comes to assessing your affordability for a mortgage.

Please call us on 1300 889 743 or fill in our free assessment form and we can help you build a strong case with the right lender.