Borrowing power living expenses

hi all,

Question around borrowing power. How does banks measure or estimate living expenses? Is it based on your actual spending or do they have a formal number for it?

I.e if my monthly spending is low do they take this into account?

Matt

 

Hi Matt
If your expenses are lower than the HEM index then banks will override the expenses.

Most lenders base the expenses on your income, and some also base it on your post code.

 

Thanks for the info. Fingers crossed they arnt too harsh lol

 

No.

The higher of your actual expenses and their estimate of what a person in your financial and personal situation would be spending.

 

How do they calculate HEM? I’d like some idea of what the bank believes my minimum is.

 

This will vary from bank to bank and depend on whether you have a spouse and how many dependant children.

As a guide CBA assess a couple with 2 kids as spending $4,000 per month roughly - other than credit expenses.

 

I was asked to fill out an expenses form
Monthly and yearly
Was all but rejected for making a fraudulent statement
They could not understand how my power bill was under $500 pa
Asked them if they had done any due diligence
After they did a Google Earth view of all the solar panels, it went thru

 

So a minimum of $48,000/annum nett without adding to savings.

 

I don't know without looking but would be the same as a working couple with no kids.

 

moving on from now, banks are more likely to verify actual living expenses ( via CC statements, bank statements ...), and still us the HEM expenses as a floor.

 

So more paperwork and more bs I have to email my broker

 

Generally you’d be sending this stuff through anyways - so mainly just more bs for your broker.

 

What about child care costs? Or do is it just a blanket rule like?
With 2 kids, child care costs come upto min 30K in Sydney per child (maybe 20K in others), that is close to 60K for 2 aka 5K per month for sending 2 kids to child care?

 

In that case they will take actual expenses as higher than their minimum estimates.

 

Can you give me an example of min 30k per child childcare cost in Sydney. If it is before gov benefit, yes it is true. But you have CCR for more than $7500 per year per child. You may have CCB too. From 2018, CCB and CCR will be merge together to form a new benefit but it will be no less than the CCR. And 2 kids both at childcare fulltime is not so common and should not last too long (kid go to prep).

 

Ok. considering 30K-7.5K that is still $22.5K per child. What I am trying to say is that $4K in most cases does not include many other costs i.e. child care, etc. If you include all those then it usually could come upto 5 to 6K with a 2kids household.

 

Unless they are twin, then the 2 kids are 18 months to 24 months apart. It means you only need to pay the two full childcare fees for a max of 12-18 months. And you only need to send both kids to childcars because both parents are working fulltime. I guess a dual income family in Sydney with fulltime jobs can earn good amount of money.

Anyways, I agree that the current bank assessment does not really look into the actual living expenses such as childcare, private school

 

What is considered good amount (easily achievable) of money in Syd for dual income households?

 

I have not done or found any survey for it so here is just my 2c based on people who I know and what they told me. $150k is what I refer to.