Home Loan Eligibility Criteria – Monthly Expenses!

  • 22 October, 2021
  • Greg Pierlot

A key element of Home Loan eligibility that often confuses and frustrates borrowers is the degree to which Lenders now review an applicant’s monthly expenditure.

Even experienced borrowers or investors are surprised by the granular detail involved!

Home Loan Eligibility – House Expenditure Method (HEM)

In the past, Lenders determined your home loan eligibility by reviewing your payslips, financial accounts and bank statements etc. and comparing your stated monthly expenditure to the Household Expenditure Measure tables

(The Household Expenditure Measure (HEM) tables use data from the Australian Bureau of Statistics to compare typical monthly expenditure for people in different situations. (Singles, couples, families, those paying rent etc).

Home Loan Eligibility – What Has Changed?

Today, Lenders determine home loan eligibility by:

  • Comparing an applicants stated monthly expenditure to their actual lived experience, as shown in their bank and credit card statements
  • Adding a Serviceability Margin to the interest rate (currently 3%) to ensure you will be able to service the loan should interest rates rise

Monthly Expenditure – Be Accurate to Avoid Delays

Most Lenders will review at least three months bank and credit card statements, however in some cases, this can extend to 6 months.

When it comes to Monthly Expenditure, the main issues tend to involve either discretionary expenditure, or payments we make on an irregular basis.

In today’s cashless world of debit cards, credit cards, and “tap and go,” it is safe to say that most of us are astonished when our estimates are compared to the harsh cold reality!

Home Finance handbook

While a lot of expenditure has been curtailed during COVID-19, in many instances, it has been replaced by other expenditure /online purchasing.

The key point being, to avoid disappointment and improve your home loan eligibility, it is worth spending the time to ensure what you include in your monthly budget, aligns with your actual average expenditure.

Reality vs. Perception

I’m not proposing that anyone considering a home, or a property investment, loan should give up their enjoyment of life!

Rather, keep in mind that while putting together your monthly budget, ALL your monthly expenses will be taken into account.

A bit of forward planning can help improve your home loan eligibility.

Improve Your Eligibility – Track Spending

Apart from online banking, there are many Apps to help you track your spending.

Some like accounting apps, you can link your bank accounts and easily track your weekly and monthly expenditure.

Once set up, they can help you track your spending, and through this, identify where savings can be made.

Get Home Finance Loan Ready!

If you can’t afford the repayments, think about what you are willing to trade-off to give yourself the best chance to obtain the finance you need.

Then, for the next three months track your spending and stick you the budget you created.

Having done this, you will be able to demonstrate to Lenders you can genuinely afford the proposed repayments, based on your spending patterns!


While the approach by Lenders may seem onerous, it is designed to ensure you can service the proposed borrowings today and in the event of future interest rate rises.

The last thing you want is your dream home or investment, causing a lot of stress and sleepless nights!

Understanding the Home Loan Criteria and a bit of planning can avoid a lot of disappointment and delays.

If you are seeking finance for the purchase of a home, or an investment property and would like to learn more, don’t hesitate to get in touch.