Home Loan Finance - Get it Right to Avoid Being Declined!

Over the past few years, there’ve been significant changes to how banks calculate living expenses when assessing your overall borrowing capacity.  Generally speaking, banks are casting a wider net on your living expenses when applying for a home loan.  So to increase your chances of approval it’s important to see if you can afford to repay the money you borrow. One of the factors lenders will take into account is your living expenses, including the amount you spend on your groceries, utilities and entertainment.  There are different methods they use but it’ll also be influenced by the size of your family and the number of dependants you have. Lenders use the following methods to calculate them:


  • They use HEM (Household Expenditure Method).  These living expense allowances are based on the size of your household, whether you’re a single applicant, a couple or if you have dependents.  In addition to this banks will also take into account whether you live in a metro area versus a non-metro area for each state
  • Ask you to self-assess your living expenses
  • Review bank accounts and credit card statements
  • Out of the above they take the higher of these 3 methods to calculate your living expenses


With this in mind, it’s important to understand how your living expenses can affect your borrowing capacity.  At Jim’s Financial Services one of our experts can help guide you through the process.  Call us on: 131 546.

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