![]() Asking you to self-assess your living expenses on your home loan application form.Using the Household Expenditure Method (HEM) based on your family size and income (Australian Bureau of Statistics data) because it is considered unreasonable for someone to spend less than HEM each month.Lenders use a few different methods, including: How do banks calculate your living expenses? These lenders recognise areas where you can easily and quickly reduce your discretionary spending, such as in entertainment and dining out.Ĭall us on 1300 889 743 or complete our online enquiry form and we can help you build a strong home loan application.Īll the inside information on calculating mortgage payments is now accessible. The key to maximising your mortgage borrowing power is finding a lender that takes a common-sense approach to your spending. In this way, they’re able to calculate your serviceability or borrowing power. They then compare that to your regular discretionary spending on items or activities that are not necessary on a day-to-day basis.įor example, banks will raise red flags for regular spending at pubs and clubs or spending on luxury fashion items. Specifically, banks will first identify your necessary regular spendings such as your bills and groceries. Your living expenses are a good indication of your character as a potential borrower. When banks assess your ability to borrow, one of the major factors they evaluate is your spending compared to income. ![]() Your details Why do banks care about my living expenses? ![]()
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