DIFFERENCE BETWEEN HEM AND CILE
Perhaps as a first home buyer or new investor you have been wondering why your finance broker goes into such detail about your living expenses. Without boring you with all the requirements under the National Consumer Protection Act which governs the conduct of brokers, it is a requirement that we provide you with credit assistance that is “Not Unsuitable” for your needs. In layman terms we have to provide you with a loan product that is suitable to your current financial situation and to do this we must make reasonable enquiries about your needs.
A very big part of your Financial Situation is your day to day living expenses. A measure of those living expenses is provided by the Melbourne Institute called the Household Expenditure Measure (HEM). It is based on your family size, location and lifestyle and is considered by most lenders as a minimum benchmark to your living expenses. As a requirement of law, we have to question you to discover what your Customer Identified Living Expenses (CILE) are. In other words what it really costs you to live from month to month.
Those costs are quite detailed and include as an industry standard the following:
- Child care – including nannies, day care, and after school care.
- Clothing and personal care – including clothes, footwear, cosmetics & other personal care.
- Education – including private school fees, uniforms and school, activities and excursions.
- Groceries – including all supermarket groceries, meat, fish and fruit & veges.
- Insurances – Home & contents, life, trauma & TFD, income protection, voluntary super and pet.
- Medical and health – Doctors, dentists, optical and pharmacy but excludes private health.
- Household costs – including repairs, gardeners, and other maintenance costs for your home.
- Recreation and entertainment – including dining out, takeaways, movies, gym & sporting fees, gifts, subscriptions and pet care.
- Connections – including mobiles, home phone and internet, pay TV services such as Foxtel, Netflix, Stan etc.
- Transport – including public transport costs and Motor vehicles costs such as fuel maintenance, registration and insurance
- Owner occupied utilities – including rates, water, electricity, gas and body corporate.
- Medical – including private health insurance and any ongoing medical costs.
- Other – including any other regular expenses you may have not included in any of the above categories.
- Rent or Board – this will be excluded from your expenses if you are purchasing an owner-occupied property but must still be included.
So, when you Broker delves into your personal situation it is not because we are sticky beaks, but because the law and regulations dictate that we must to ensure you are able to meet your financial commitments into the future.