Understanding common debt reducer policy

We have a common debt reducer policy which is only available for spousal relationships (either married or de facto relationship). 

This policy doesn’t cover:

• family members, or
• a spouse borrowing with a third party (e.g. their sibling)

Where an applicant has a joint commitment with a non-applicant spouse (held or to be held either with Macquarie or another financial institution) the two scenarios are:

1. 100% of the joint commitment is included in servicing, therefore 100% of any associated rental income and negative gearing benefit can be used in the servicing calculation
2. A portion of the joint commitment is considered in servicing, therefore the non-applicant spouse will need to also show ability to service the remaining portion using a verified household servicing calculation, with income and all commitments of the non-applicant spouse included. This means we don’t automatically split the debt 50/50.
   

Typically, where only a portion of joint commitments are being considered, the non-applicant will be required to complete a Non-applicant Statement of Position form. This form will require their:

• personal details
• employment details
• financial position
• living expenses
• declaration that they’re aware of the new loan being applied for by their partner.

This form isn’t required where the joint commitment:

• is being applied for concurrently through Macquarie, or
• is already held with Macquarie and the previous approval was less than 90 days ago.
   

When an applicant is using common debt reducer policy with their non-applicant spouse, you’ll need to input their applicant status as follows to ensure the applicant Household Expense Measure (HEM) is used:

• In the servicing calculator you’ll need to run two scenarios. One with the applicant as ‘Single’, and the other as ‘Married/De facto’. When submitting, provide PDFs of both versions, and
• In ApplyOnline enter either ‘Married’ or ‘De facto’ to ensure the customer’s data is accurate.

If the servicing in ApplyOnline isn’t servicing due to the higher HEM figure being applied, contact your BDM.

Once the non-applicant spouse has completed their statement of position, you’ll need to input the applicant’s and non-applicant's information into the servicing calculator and ensure servicing is met. The servicing calculator will need to be provided with the application.

Consider whether the commitment is fully included in servicing or only a portion, as this may impact the income attributed to the applicant. Joint spousal loans don’t need to be apportioned 50/50. If the spouse earns more money and therefore pays more of the joint debt, this can be represented in the servicing calculator.

For example, if the joint loan was $500,000 although only 20% is serviced by the applicant, this could be apportioned as $100,000 for the applicant and $400,000 for the spousal non-applicant.

Where an applicant has a joint commitment with parties other than their spouse and who aren’t included in the application, 100% of the commitment is to be used in the servicing calculation.

For example, if an applicant owns 50% of an investment property with the other party (e.g. their sibling) and they have a loan together for $500,000:

• the liability used in servicing will be $500,000, and
• the income used in servicing will be 50% of any rental income and negative gearing benefit used in the servicing calculation (i.e. their portion of the income).