Why your refinance failed serviceability: the calculator errors we see most
A borrower is refinancing a loan they have serviced comfortably for years, into a smaller repayment, and the calculator says no. That is almost never an affordability problem. It is a data problem.
Check this one first
The loan being refinanced counted twice. Once as an existing liability, and again as the new proposed loan.
On one file this alone dropped the net servicing ratio below 1.0. Removing the duplicate brought it to a passing 1.01 with nothing else changed. It is the first thing to check whenever a straightforward refinance unexpectedly fails.
Unused credit limits
A credit card limit is loaded at a notional monthly cost regardless of the balance. One lender’s calculator applies 3.8% of the limit per month.
Run that: $130,000 of unused limits attracted a notional cost of roughly $4,940 a month — against a minimum living-expense allocation of $4,588.85 for that borrower profile. The cards were empty.
Most financiers use a broadly similar loading. Where serviceability is tight, cancelling or reducing unused limits before submission is far more effective than inflating a declared income to compensate.
Living expenses below benchmark
When an assessor flags declared expenses below benchmark for a borrower in a de facto household, the cause is usually not understatement. It is a joint-versus-individual-share mismatch.
Break every category into the applicant’s individual share against the full joint household figure — groceries $400 individual against $1,000 joint, and so on down through recreation, utilities, telephone, medical, transport and insurance. On one file that produced $1,901.18 individual against $4,027.36 joint. Presenting it that way resolves the flag without inflating the declared number.
Two related double-counts:
- Utilities bundled into a boarding or rental arrangement should not also be declared as a separate outgoing. One calculation was understated by $280 a month for exactly this.
- Business liabilities serviced by the business itself should be flagged explicitly, with a note confirming the business rather than the individual meets the repayment. That note alone usually heads off the query.
The income lines that get missed
- Compulsory study-loan repayments. Check the notice of assessment for a compulsory repayment line — one file showed $5,731.65. It is easy to miss if only payslips are reviewed, and it changes the outcome directly.
- Salary sacrifice. Some lenders gross sacrificed income back up, reversing the tax deduction, but require confirmation the sacrifice is not itself funding a debt.
- Gross profit instead of net income. Self-employed servicing must use net income after excluding government payments. One application was declined purely because gross profit had been entered.
- Bonus and variable income. Where the current year is tracking below the figure used originally, build a quarter-by-quarter comparison across three financial years, annualise the current year’s trend, and present the three-year average as the defensible number.
Two things that need explaining, not just disclosing
Recurring payments to a named individual. A regular payment on statements reads as an undisclosed liability unless it is characterised in writing — for instance as a now fully repaid informal family loan, with supporting evidence.
Betting transactions. Winnings cannot be netted against losses. Only the gross average monthly outflow counts. The productive approach is to declare it conservatively as a bounded, seasonally variable recreation expense — one file voluntarily raised a declared figure from $1,500 to $2,000 a month against an actual three-month average of $1,490, specifically to pre-empt the query rather than argue the numbers matched.
Liabilities that can legitimately come out
- Liabilities against a jointly-owned entity with unrelated beneficiaries. Roughly $933,650 — an $80,000 private loan plus an $853,650 mortgage — was excluded on one file once a written explanation satisfied the lender the entity had other unrelated beneficiaries and the debt was not solely the borrower’s.
- Liabilities held by genuinely separate investment holding companies, with no shared borrowers, guarantors or security. Explain the corporate separation proactively rather than letting the query stall the file.
- Non-cash and discretionary items as add-backs — consulting fees, interest, depreciation — but only with the accountant’s written confirmation. On one trust borrower a net loss of −$52,235 serviced comfortably once roughly $610,000 of interest and $401,000 of related-party consultancy costs were added back. Flag related-party payments upfront; credit will query them regardless.
One caution: add-backs draw a capacity test if unsupported. Have the evidence ready at submission — on one debt-consolidation refinance the assessor required evidence for $15,000 of add-backs, six months of full statements on every unsecured facility being refinanced, and a closure letter for an undisclosed overdraft found on the credit file.
Two structural fixes worth knowing
Reallocate income rather than cutting across the board. On a multi-security application, selectively moving rental income and negative-gearing benefit to only the security where it is actually evidenced can beat a blanket loan reduction. On one file, reducing the first loan to $360,000 and moving all rental income and negative gearing there while stripping it from the second lifted maximum eligible servicing to $1,003,001 against $1,000,000 of proposed loans.
Rebuild the gap legitimately when an undeclared loan surfaces. On one deal an 80% LVR request of $948,000 was initially only supported to 71.73% once an existing facility was added to liabilities. The gap was closed by adding previously omitted rental income and getting accountant sign-off to lift declared personal income by reducing retained earnings kept in the business.
The submission-hygiene check
Cross-check that every liability entered into the lender’s servicing calculator is mirrored in the application system. The two get out of sync even when the correct figure was used to calculate serviceability — and a mismatch looks like non-disclosure to an assessor, which is a far worse problem than a servicing shortfall.
General information only. It is not credit assistance, financial product advice, or an offer of finance, and it does not take account of your objectives, financial situation or needs. Calculator treatments vary by lender and are indicative observations over 2024–2026.