Bank statements and bank due dilligence

Discussion in 'Loans & Mortgage Brokers' started by Beelzebub, 2nd Jun, 2018.

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  1. Beelzebub

    Beelzebub Well-Known Member

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    I recently read an article whereby some girl who was applying for finance had her bank statements poured over by the bank who questioned and challenged her spending habits. In that article (cant find it now apologies) the bank apparently suggested that she cancel her gym membership to improve her serviceability.

    Does this sound right? Is this the new normal? Are banks now checking bank statements to workout true living expenses down to discretionary items such as gym memberships?
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    At this point most lenders aren't asking specifically for transaction statements, but if they have them, they will look at spending patterns and they will analyse them and ask questions if necessary. It is the new normal.

    This tends to occur when:
    * The CBA asks for the statement where your salary is paid into. It's not specifically for living expense purposes, more to see if you've got any debts which aren't disclosed in the application.
    * Banks require evidence of funds for the deposit and costs. Sometimes this is separate to peoples day to day account, sometimes not.
    * If you already do your transactional banking with that lender, they will look at those accounts.

    In all of these cases they aren't specifically taking these for living expenses, but if it's in front of them they look and they can't un-see anything.

    It's quite common these days that I get asked questions about living related entries in a persons transaction accounts which we haven't even supplied to the bank. This is priority number 1 at the moment (that is not an exaggeration).

    Lenders have all said they don't want to analyse transactions as a matter of policy. They know that what they find might often cause the finance to fail. I can see the Royal Commission recommending this become mandatory however, the RC has giving it considerable focus.

    At some point I think the banks will mature on how they analyse and apply the difference between absolute cost of living and discretionary cost of living. Cynically I can see the day when brokers will train clients several months in advance to have several accounts. One to show the banks and one to actually spend money out of.
     
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  3. Beelzebub

    Beelzebub Well-Known Member

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    Well, in a way I already do that, unfortunately I get paid directly into those multiple accounts.

    So your advice would be to be paid into the one account and then move spending money into another account? Particularly where serviceability is tight?
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    If your spending is above the minimum HEM figures, then you could prepare your bank statements a few months out from the next purchase to look better.

    My advice though, would be to save as much as possible and spend as little as possible (kind of obvious really).
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Common sense. :confused:
     
  6. Eric Wu

    Eric Wu Well-Known Member Business Member

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    I think this is the extreme case, banks asking canceling gym membership. But with the RC, it is not a surprise. Bit tricky to differentiate discretionary spending from non discretionary spending, or more to convince lenders on that.

    It is true lenders are looking more closely on spendings. Lenders take actual spending or HEM, whichever is higher.
     
  7. Otie

    Otie Well-Known Member

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    @Peter_Tersteeg are they asking for bank statements for self employed to confirm income going when tax returns are provided? Or no bank statements at all?
     
  8. Medine

    Medine Well-Known Member

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    Banks are so jittery at present.
    I had a bank assessor this week ask 'what is the direct debit to AGL? Is it an undisclosed debt?'
    They had seen the entry on the one month's salary account that they asked for.
    I had to explain that AGL was an energy provider (??!!) and that the expense was captured in the living expenses. This process added a week to the refinance process.
    So, my take on it is that if you can give a salary credit account that is absolutely clean of anything except salary receipts and a few transfers out that would be perfect.
    Of course I have never seen this as we don't live in a perfect world :)
     
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  9. d_walsh

    d_walsh Well-Known Member

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    A good idea is to put all spending on a credit card and pay off every month to avoid / minimise interest. Have a salary account to receive wages, and process payments to credit card as account transfers. Provides clean bank statements showing your wages and various outgoing transfers (non-descriptive).

    Credit card can be replaced or used in conjunction with a dedicated expenses account.
     
  10. Beelzebub

    Beelzebub Well-Known Member

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    Love the theory of paying down the credit card each month; fear the reality.
     
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  11. Otie

    Otie Well-Known Member

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    I don't think this will work either anymore. In early 2017 I was doing a refinance on one of my properties, and being self employed they wanted to see bank statements (personal/business as I am a sole trader). They saw payments I was putting into my Qantas cash prepaid visa card (I put money in there to pick up extra FF points). They requested copies of all of my statements for the qantas prepaid visa account and added these spendings to my living expenses. They even included holiday spending for flights, accomodation and things that aren't living expenses but luxuries that could easily be seen as something to cut back on like take a away food etc.
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    discretion :)

    ta
    rolf
     
  13. Otie

    Otie Well-Known Member

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    more like :(
     
  14. d_walsh

    d_walsh Well-Known Member

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    Yes paying down every month may not be for everyone, but the process still applies
     
  15. Lifeinonemotion

    Lifeinonemotion Member

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    From my personal experience in lending-land it’s generally offshore assessors/processors asking about utilities (and speeding fines) ...their trained to look for things that look like debts.......