Before working in finance my eyes were opened to the complexity involved with business premises…
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)
(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?
Monthly Expenditure - Be Accurate to Avoid Delays
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 of fantastic Apps to help you track your spending:
One of our favourites is the Australian App, Pocketbook.
Like Accounting Apps, you can link your Bank Accounts and easily track your weekly and monthly expenditure.
Once set up, it can help you track you’re 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.