When applying for a home loan, lenders require applicants to provide a Statement of living expenses. This document provides a clear picture of how much of your income is already committed to ongoing expenses, helping lenders determine how much you can afford to borrow and to ensure you can manage your loan repayments without financial strain.
Lenders are required assess your living expenses as part of their duty to lend responsibly. Here’s why this document is critical:
Affordability Check: Lenders want to ensure you can comfortably afford loan repayments in addition to your existing expenses without experiencing financial hardship.
Debt-to-Income Ratio: This calculation compares your monthly debt obligations (including the proposed loan) to your income. A high debt-to-income ratio could indicate overextension.
Responsible Lending Requirements: Australian law requires lenders to verify your financial situation to prevent you from borrowing more than you can manage.
Tailored Loan Offers: By understanding your expenses, lenders can offer loan terms that align with your financial capacity, minimising the risk of default.
Providing an accurate and detailed Statement of Living Expenses builds trust and improves your chances of loan approval. Incomplete or underestimated expenses can raise red flags for lenders and delay the process.
Your statement should include all expenses you expect to incur on an ongoing basis. This includes the following:
Expenses for your Principal Place of Residence
Include all expenses relating to running the home that is your primary residence, whether you are the owner or renting. This includes everything from rates, utilities, insurance and rent to repairs & maintenance and furniture and furnishings.
Communications & Entertainment Expenses
Include all expenses such as internet, mobiles and streaming services.
Food Expenses
List your expenses relating to buying food to consume at home, such as supermarkets, butchers and greengrocers.
Clothing & Personal Care Expenses
Provide the costs of your expenditure on items such as clothing, shoes, hair & beauty products and baby products.
Transport Expenses
Detail how much you spend on car expenses such as petrol, tolls and parking as well as on public transport and taxis.
Insurance Expenses
List all insurance expenses, excluding home insurance and pet insurance, which are covered elsewhere. This might include everything from health insurance to car insurance to life insurance.
Education & Childcare Expenses
Provide details of all expenses relating to your children. Include everything from childcare expenses to school fees, tutors and text books.
Health & Medical Expenses
Include details of all medical and health expenses you incur, from doctors to allied health professionals to medicines and prescriptions.
Entertainment & Recreation Expenses
This is the fun and discretionary items that we like to spend on! Include expenditure on everything from restaurants and bars to alcohol & cigarettes to travel & holidays.
Pet Expenses
List all expenses related to looking after your pet(s). Include pet food, care, insurance & vet fees.
Child & Spouse Support Expenses
If you pay maintenance for a child or spouse / de-facto partner, include the details of these payments.
Professional Fees
Include fees paid to your accountant, lawyer or financial adviser as well as any professional fees or union dues.
Expenses for your Secondary Residence
If you own a secondary residence, such as a holiday home, provide details of all costs related to running that residence.
Expenses for your Investment Properties
If you own an investment property or properties, include details of all expenses incurred in operating the property.
To help you get started, we’ve created an easy-to-use Excel template for your Statement of Living Expenses. Simply download the template, fill in your details, and you’ll have a professional, clear list of all your living expenses to provide to your broker and lenders.
