What is Notional Rent?

If you live rent free, say at home etc, most banks will still factor in a figure for your rental payments, even if you don’t have to make any!

Weird right.

You don’t pay rent, but the bank pretend you do – why is it so?

Well, under responsible lending, the bank have to treat your situation as though it could be a worse case scenario. So let’s say you’re buying a block of land and you live rent free with parents.

You can’t live on your block (short of camping, which the banks won’t accept) and if you had a falling out with your parents you’ need to pay rent so the banks will factor that as an ongoing expense sort of like an “in case of”. Usually it’s around $650 per month.