HEM is the Household Expenditure Measure, which determines ‘benchmark’ living expenses a household should be spending on a monthly basis. A lender will use HEM as a proxy for expected living expenses, depending on your applicant's 'household'.

A lender’s HEM is always made up of a table of benchmarks that will be determined on a number of parameters eg:

The HEM benchmark is then used to compare against the applicant’s declared living expenses. Where the declared living expenses are less that the expected HEM that matches the applicant details, the lender will generally then use HEM instead of declared living expenses in serviceability calculations.

In Loanapp, we need to gather the correct detail about income, location, household makeup in order to then determine the correct HEM benchmark to compare against declared living expenses, and then apply to the serviceability calculations.

The detail that is entered in the Household segment is important in determining HEM. At a minimum, the data that needs to be captured per household is:

How many Adults, and how many Dependants - this is important to determine the amount of people that live in a household, to identify the correct HEM benchmark:

Relationship Status - this is important to determine whether the "Single" or "Couple" benchmark is used:

The income of each applicant is used to determine the income band that will be used in HEM. Note that all income types are included, and will be added to the Person Applicant's income based on the ownership set for each income type.

Location, where used by the Lender to vary HEM benchmarks, will be based on the Postcode of the Applicant's post-settlement address:

In general, Loanapp will: