How lenders work out what you can borrow.

1. Your income

Lenders start with your regular income, such as salary or wages. Overtime, bonuses, commission and rental income may count too, but lenders often count only part of them, and each lender treats them differently. If you're self-employed, lenders usually look at your last two years of financial statements.

2. Your living expenses

Lenders look at what you actually spend, usually through your recent bank statements, and compare it with their own minimum figures. Regular spending on things like takeaways, subscriptions and entertainment all counts.

3. Your debts, including unused credit

Every debt reduces what you may borrow. Lenders count credit cards at 4% of the limit each month, even if you pay them off in full or never use them. Buy now, pay later, car loans, personal loans and student loans all reduce your borrowing too.

4. The test interest rate

Lenders don't test your loan at today's rate. They check you could still afford it if rates went up, usually at about the 2-year fixed rate plus 2%. So even if rates are lower today, your borrowing is worked out at the higher test rate.

5. Debt-to-income limits

The Reserve Bank limits how much banks may lend compared with your income. For owner-occupiers, most lending is capped at 6 times your gross income. Investors have a separate limit.

6. Your deposit

Your deposit affects which lenders and loans are open to you. With less than 20%, there are fewer options, and the lender may add a low equity fee or margin. With 20% or more, you have more choice.

How you may borrow more

• Close credit cards you don't use, or lower the limits.
• Pay off buy now, pay later and small debts.
• Keep your spending steady for a few months before you apply.
• Add a partner's income, if you're buying together.