Do banks count private health insurance as a living expense?

Most banks add it on top of their living-cost benchmark rather than counting it inside it. A few lenders treat it differently.

What is the Household Expenditure Measure?

It's a benchmark banks use to estimate what a household spends on everyday living, based on income, whether you're single or a couple, and how many kids you have. Banks generally use the higher of the benchmark and what you declare.

What expenses do banks add on top of living expenses?

Generally private school fees, child support, private health insurance, income protection and life insurance.

Does private health insurance reduce my borrowing power?

It can, at most banks, because it's added on top of your assessed living expenses. How much depends on the premium and the lender.

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Does private health insurance count as part of my general living expenses?

Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 2 min read

The short answer

For most banks, no. Private health insurance is generally added on top of your general living expenses, not counted inside them, and that can reduce how much you're able to borrow.

Banks measure your everyday spending against a benchmark called the Household Expenditure Measure. Things like private health, school fees, child support, income protection and life insurance generally sit outside that benchmark and get added on top.

The two minute version, filmed from the driver's seat. The rest of this page is the detail underneath it.

How the bank works out your living expenses

As part of onboarding, we go through a bit of a budget together to see what your household actually spends. The bank then compares that against the Household Expenditure Measure, a benchmark built from Australian spending data that takes a rough guess at what a household like yours spends on everything that isn't rent or a mortgage repayment.

It looks at your income, whether you're single or a couple, and how many kids you've got. The bank then uses the higher of what you've declared and what the benchmark says. So even if you're a careful spender, you'll generally be assessed at the benchmark at least.

Where private health fits

The benchmark covers the everyday stuff: groceries, utilities, transport, clothing and so on. Some costs are treated as commitments on top of it, and private health insurance is generally one of them, alongside private school fees, child support, income protection and life insurance.

Because those get added on top, they push up the expenses the bank assesses you on, and that brings down how much you can borrow. A few lenders treat private health differently, and with them you may be able to borrow more, especially if we can show your general living expenses, private health included, sit at or below the benchmark.

The honest bit: don't cancel your cover for a loan

Dropping private health to squeeze out a bit more borrowing power is rarely worth it, and the bank will generally ask what you've been spending over recent months anyway. The better lever is choosing the lender whose method suits your budget.

Lender policy on this shifts, so it's worth checking how each one treats it at the time you apply. That's the homework I do with you, sifting through the noise to find the options that suit your situation.

Want to know how your expenses look to a bank?

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Next question

Why does the bank ignore my actual budget?

Banks use HEM, the Household Expenditure Measure, a benchmark of average household spending.