In particular we focus on getting the loan structure right the first time, choosing which lenders to use in the right order (yes this is important) and finally getting our clients the best deal possible.
Expenses
Determining monthly living expenses is a crucial aspect of the home loan application as they help determine the borrower’s ability to afford the mortgage repayments along with their other financial obligations.
They are normally broken down into 2 categories:
Essential/regular expenses: groceries, entertainment, utilities, general insurance, transport, telephone, education/childcare etc
Non-essential expenses: private health insurance, other extra insurance (ie. Life etc), private school fees, strata fees etc
Each lender has their own ‘benchmark’ of what they will consider ‘living expenses’ to be, based on your income. This is known as HEM (Household Expenditure Measure). It is important for borrowers to provide accurate and comprehensive information about their living expenses as it can lead to problems down the track and may affect the lender’s decision.
The lender will take rent into account if you purchase a property but don’t intend to live it in, as it will be an ongoing expense.
But if you’re purchasing a property to live in, once the loan settles you will move into it, so they don’t need to factor your rent payments in anymore as an ongoing expense.
Learn MoreGeneral Living expenses include; Primary residence expenses, food and groceries, transportation, telephone/Internet/Streaming, medical/healthcare costs and clothing. These are considered the lenders benchmark on general spending per month, known as HEM (household expenditure measure).
Additional living expenses take into account things like rent (if you’re not living in the property you buy), private health insurance, strata fees (for apartments/unit blocks), private school fees. These types of expenses are added to the general living expenses total, which are above the lenders HEM totals.
They are recorded in a home loan application over a monthly period.
Learn MoreLenders use the Household Expenditure Method (HEM) based on your family size and income because it is considered unreasonable for someone to spend less than HEM each month.
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