You’re preparing up all your information for your broker and you want to have the best chance of getting your loan approved. It’s natural to think that you want to put your best foot forward in everything you send to the bank.
BUT”¦ Don’t estimate low on your living expenses.
For starters – it doesn’t actually help. The bank will base your living expenses (regardless of what you declare or how frugally you live) on their definition of what is the minimum living expenses for an application with as many people on it as yours (ie: 2 adults, 2 kids etc).
Secondly – putting your expenses too low only actually draws attention to your application in an unwanted way.
Thirdly – the bank can and often will verify your living expenses based on what you actually have spent from your account, estimating too low causes issues.
Finally – as your brokers, it’s our job to make sure you can reasonably afford whatever loan we proceed with. To do that we need you to put down a reasonable estimate of your expenses.
Here’s where most people underestimate:
– Food and groceries: think realistically about what it costs to feed, buy cleaning gear, toilet paper, toothpaste etc for your whole family
– Utilities – a bare minimum of $500 a month should be estimated to cover the family home’s water, rates, electricity – but look at your bills and see if yours may be higher
– Entertainment/recreation should include gym memberships, sporting fees, drinking and eating out etc along with your clothing expenses.
– Transport, be sure to include petrol, servicing, rego
– Insurance – be sure to include both car and property
Please let us know if you’re unsure on anything. If you have a specific reason for having lower than normal expenses (ie: you’re living with parents, work pays for some of your expenses etc) please let us know.