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Monthly Financial Position table
Monthly Financial Position table

Explaining elements of monthly financial position table in Broker Tools

Dalibor Ivkovic avatar
Written by Dalibor Ivkovic
Updated over a week ago

Monthly financial position table is the key element of responsible lending and best interest duty requirements.

1. Top and Bottom Sections

Top section relates to information relevant to the lender (servicing information), a position at the time of interview. Bottom section relates to the foreseeable changes (known to occur after the interview).

Top section

  • Net income - net income after tax

  • Total current repayment - sum of all current debt

  • Total proposed repayment - new debt repayments (P&I)

  • Total current expenses - our Expense buffer calculation follows LIXI guidelines on expense items that are in and out of HEM. When expenses are collected, only those types of expenses that are in HEM will be compared to HEM, and if the sum of those items is less than HEM dictates, then the HEM figure will be used in the buffer calculation. In such a case, the total buffer expenses will be HEM + sum of items out of HEM. Read more on expenses calculation in this article.

*note: investment income from the new position is not current income, it is now recognized as income in the monthly financial surplus table as opposed to the income tab.

This is the way how we now display existing and proposed investment income:

  • New Investment income goes into the proposed and buffer position;

  • Existing investment income goes into the current, proposed and buffer position.

Bottom section

  • Commitments ceasing - loan repayments stopping in the near future. Eg. car loan paid out.

  • Income increasing - known promotion or increased income in the future. Eg. known upcoming promotion.

  • Expense decreasing - known reduced expenses. Eg. school fees ceasing.

  • New debt commitments - desired future loans. Eg. Planning to buy a boat/car on loan.

  • Income decreasing - known income reductions. Eg. Planned maternity.

  • Expense increasing - known increased living expenses. Eg. Imminent school fees.

2. Columns

Three columns represent the following:

  • Left - Client's position prior to loan arrangement..

  • Centre - actual position if loan is approved.

  • Right - buffer (or stress) position, with rental income calculated at 80% of actual (A)(shown figures are post tax); current mortgages repayments at 1.35x of actual (B); and proposed new debt at 7.25% (C) (Note: these figures (A, B & C) can change depending on licence holder buffer requirements). Buffer is there to test the deal for the scenario where interest rates are higher than current.

Rental expense

If rental expense is declared in Expenses tab; system will look at the Security tab to decide if these need to be included or not in the Proposed and Buffer expense fields. If the Security is owner occupied, rental expense will be removed. If Security purpose is investment, rental expense will be included in Proposed and Buffer expense fields.

Buffer Deficit

Negative buffer sum requires comments and broker understanding of potential impact on client's position. 

Note - lender servicing might be positive while buffer position is negative. This might be normal but needs to be explained in servicing notes.

3. Table Comments

This table is kept for as long as deal is kept in the system and can be printed in compliance documents.

Completing this table and keeping comments is critical in proving responsible lending and (if required) best interest duty.

4. Printing in Documents

This table can be printed in compliance documents using this merge field: {@brokerToolsTablesMonthlyFinancialPosition}.

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