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Home Loan Eligibility Criteria – Monthly Expenses!

Understand Home Loan Eligibility

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 ability to service and repay the borrowing by:

  • Payslips, Financial Accounts and Bank Statements etc.
  • 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!

While a lot of expenditure has been curtailed during COVID-19, in many instances, it has been replaced by other expenditure /online purchasing.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 frustration, 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 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’re thinking about buying a home, undertaking renovations, or buying an investment property then at least 3 months before submitting your application, it pays to:

  • Go through your bank & credit card statements and perform a reality check for least the previous three months
  • Make a budget to determine if you can afford the proposed repayments based on your current spending patterns and other financial commitments

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.
Carlo Colangelo - The 500 Group - Mortgage Finance

Carlo Colangelo

Carlo Colangelo - The 500 Group - Mortgage Finance

Carlo has a background in Senior Relationship Management, Private Banking and Mortgage Broking finance of over 30 years.

He enjoys helping clients successfully navigate the world of home and property investment finance to access the finance they need.

Carlo Colangelo is a credit representative (530636) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237)

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