When it comes to home loan applications, accurately assessing living expenses remains one of the most critical – and closely scrutinised – steps in the process.
Recently, we’ve noticed a recurring trend where declared monthly expenses don’t align with what’s reflected in applicants’ bank statements. It’s an easy issue to overlook, but one that can have a real impact on application outcomes.
Let’s explore a few key areas to focus on when reviewing living expenses:
- What to look for when reviewing statements
- Common pitfalls when using AI tools
- Key categorisation guidance (especially health insurance)
Why living expenses matter
Living expenses are not just a compliance requirement, they directly impact:
- Serviceability outcomes
- Responsible lending assessments
- Overall application credibility
When expenses are understated or miscategorised, this can lead to lender queries, approval delays, file rework – and in some cases, declined applications. A thorough review upfront saves time for everyone.
Reviewing statements: Key focus areas
A good statement review goes beyond a quick scan.
Key reminders:
1. Review the full period.
- Ensure at least a full 30 days are reviewed
- Watch for irregular or seasonal expenses
2. Identify recurring expenses.
Look for consistent transactions including:
- Groceries
- Transport
- Childcare
- Subscriptions
- Insurance
- Medical
If these appear in statements but not in declared expenses, ask questions.
3. Sense‑check the numbers.
Ask yourself: “Does this declared figure realistically match what I’m seeing in the statements?”
Important reminder: Health insurance
We continue to see confusion around health insurance categorisation.
For P&N Bank, health insurance must be captured under Healthcare, not General Insurance.
Please take extra care to ensure this is recorded correctly.
Using AI tools: Helpful, not foolproof
AI tools can support statement analysis, but they are not a substitute for broker judgement.
Common pitfalls
- Mis-categorised transactions (health, childcare, discretionary spend)
- One‑off large expenses ignored
- AI summaries accepted without cross‑checking
Best practice
- Use AI as a first pass only
- Manually review unclear or flagged transactions
- Confirm recurring expenses match declared figures
- Question anything that looks “too clean”
If something doesn’t feel right, dig deeper.
Handy tips
- Compare declared expenses to average monthly spend, not the lowest month
- Highlight or note recurring transactions
- Have clear conversations with clients about real spending habits
- Document and explain any variances between statements and declared figures
Final thought
A strong living expense review protects, your client, your application, and you as a broker.
Getting the detail right upfront improves outcomes and reduces friction later. When in doubt, clarify, adjust and document – a much better strategy than hoping a discrepancy won’t be questioned.
If you have any questions or need additional support, please get in touch.