Actual expenses instead of HEM for assessment

Hi everyone,

A simple query- would/can a lender assess borrowing capacity on actual expense rather than going by HEM? Are there any lenders who could do this?

Our monthly expenses are far less than HEM. I want to buy a PPOR and convert current PPOR to IP. I have taken equity out, and want to upgrade to a better house. Borrowing power if calculated against HEM is limiting my choices.

If HEM is what all lenders go by, then will find a side gig to pump up that borrowing capacity.

Thank you for your time and responses

 

Yes most will do that - if your actual expenses are higher. but probably not if under.

 

Thanks Terry.
There goes my weekend for few months

Its interesting though that they dont consider actual expenses if its lower than HEM

Appreciate your response.

 

If you declare below HEM, many lenders will then require copies of your bank statements to verify this (assuming they don't already). They'll then just use the HEM figure anyway. In other words, declaring below HEM is pointless and only creates pain.

A second job may not be the answer either. Most lenders will want you to hold the second job for a minimum of 6 months before they consider this income, some will want 12 months.

 

That describes me quite well. Despite an LVR under 20 per cent its was hard to get a mortgage. Maybe it was too small.

This Westpac beats watchdog in battle of the beef - InfoChoice details a case with Westpac. For all my mortgages I've attempted to have the lender avoid the HEM and instead look at my savings pattern over a year or two. It's quite consistent, easily able to manage a mortgage, even with a 300 basis point increase on the rate (has not happened - yet) and the trauma of the pandemic meltdown (very real).

 

All calculators used by banks have a set HEM, they would never go lower then that, only higher.

 

... including Westpac.

Westpac may have won the case with ASIC, but all it meant was they avoided a fine. It's had no impact on lending practices.

 

Always at HEM or above - however HEM figures can vary substantially between lenders.

 

Which banks have lower HEM?

 

2nd and 3rd tiers

 

I cannot find a website that has HEM examples. Can someone please
direct me to such a website? Thank you.

 

There won't be anywhere you can find HEM tables published - it varies by lenders depending on a number of factors like household income, dependents, etc. and they are updated regularly.

 

Morgs, thanks. That explains why I could not find it.

 

Plus the more income you earn the higher HEM is. Have had a couple of occasions where my clients borrowing capacity has actually reduced when I factored in extra income like overtime or allowances.

 

I've experienced the same.

I recal putting together an equity release with the NAB. The calcualtor accepted the living expenses.

Then put together a second calculator for the next deal, a purchase using the equity release as a deposit. The second calculator didn't accept the living expense figures because income had increased. The increase was the extra rent from the proposed purchase.

Last time I checked, people tend to tighten their belts when they buy a new property, not go on a spending spree!

 

Spot on mate!

 

Just found Ubank has 35 max term loan. Wondering with that extra 60 months, I might be able to borrow bit more.

Already requested to set up a meeting with a lending manager. Lets see how it goes.

 

If you're trying to figure out which lenders will give you more borrowing power, better to speak with a broker that has multiple options (including Ubank), rather than someone who only has a single product to offer.