Recently I have been using the spousal living expense proportioning policy a lot to boost some customers’ borrowing capacity. Gaining some understanding of this will benefit some customers.
The policy only applies to situations where customers –
- are in a relationship and live under the same household;
- both earn incomes and can support themselves without the other partner’s contribution;
- only one customer will borrow.
In this situation, the household living expense can be proportioned so the borrower only takes up his/her share as monthly expense when working out the borrowing capacity. The benefit is that the borrower takes up smaller living expenses and therefore the borrowing capacity is increased.
Each lender has its own way to work out how it’s proportioned. This also has an impact on the final borrowing capacity calculated by each lender.
Don’t get this confused with the common debt reducer policy which is to reduce the borrower’s liabilities to his/her share in the common debt. This policy typically also increases the borrowing capacity.
If you have any questions about spousal living expense proportioning policy or wonder whether it applies to you, please do not hesitate to reach out to me.
