When purchasing a home, it is essential to consider other living expenses outside the applicant’s mortgage repayments, to get a better understanding of their lending capabilities. In the past, lenders have used an indexed living expense to determine the budget for the household, dependent on the number of adults and children living in the house.
However, this expense has continued to increase over the past 12 months and lenders became more stringent on the living expense amount that applicants stated in a loan application. Due to this, lenders have made the decision to no longer use an indexed figure based on the amount of people living in the house.
Lenders have now changed their approach and use the figure as a guide only, requesting the applicants to provide a specific figure according to their situation. Some lenders have gone as far as asking for a monthly statement from the applicant’s bank to verify these costs.
At Launch Finance, we sit down with our clients and take the time to thoroughly go through their living expenses and work out how much they spend on items like, food, petrol, electricity, water, gas, internet, etc. The more information that we can obtain from the client, the better we can assist them in creating an affordable budget. By understanding the measures used by lenders we can help clients get ahead and suggest a budget to assist in ensuring they do not fall behind with their repayments.