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, and 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 BCU 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.