So, you’ve found the perfect home, your deposit is poised, and you’re ready for that crucial nod from the bank. But wait, there’s a sneaky little term called the Household Expenditure Measure (HEM) looming in the shadows. What exactly is it, and why might it throw a wrench into your homeownership aspirations?
What’s HEM?
Think of HEM as a yardstick for financial assessment tailored to different households. Crafted by the Melbourne Institute, it utilizes data from the Australian Bureau of Statistics to estimate the average expenditure on basic necessities (excluding rent/mortgage). Lenders employ this benchmark to evaluate whether you can comfortably handle the loan you’re seeking.
Hem Isn’t One Size Fits All
While HEM provides a general guideline, your actual spending may diverge significantly from it. But fear not, lenders don’t rely solely on HEM. They delve into your bank statements, comparing and usually using the higher figure for their calculations. It’s all about ensuring you’re not stretching yourself too thin post-mortgage.
Top HEM Tips to Amp Up Your Borrowing Power
Looking to make HEM your ally? Here’s how:
- Know Your Spending: Scrutinize your bank statements before applying. Highlight any major one-off expenses to provide context and avoid inflating your monthly costs artificially.
- It’s for Your Protection: Despite feeling intrusive, this scrutiny is for everyone’s benefit. Lenders aim to shield you from biting off more than you can chew.
- Seek Expert Help: As your home loan specialist, we know precisely how to navigate your statements to streamline the HEM process. Consider us your allies in securing that loan.
The Fine Print
It’s vital to understand HEM’s limitations:
- No Frills: HEM focuses strictly on absolute and discretionary basics like food, utilities, and some entertainment. It excludes expenses like private school fees, life insurance, super contributions, owners’ corps fees, etc.
- Not All Expenses Count: Unlike living expense calculators, HEM serves as a statistical benchmark for lenders, not a personal budgeting tool.
EM is merely one piece of your home loan puzzle. Lenders also scrutinize factors like income, debt, credit history, and more. Your financial habits matter:
- Live Within Your Means
- Save Diligently
- Tackle Existing Debt
In essence, while HEM may seem like an obstacle, understanding and navigating it strategically can enhance your chances of securing that dream home without compromising your financial well-being.
Ready to navigate the HEM maze and secure your dream home hassle-free? Contact us today, and let’s turn your homeownership dreams into reality!