Income is the starting point

Lenders look at stable, verifiable income such as salary, wages, some allowances, business income and, in certain cases, rental income. The documents required differ for employees, contractors and self-employed applicants. Overtime, bonuses and commissions may be assessed differently by each lender.

Expenses and existing debts reduce capacity

Credit card limits, personal loans, car finance, HECS or HELP repayments, dependants and household living expenses can all change your result. Reducing a credit card limit can improve serviceability even when there is no current balance, because lenders usually assess the available limit.

Lenders test repayments at a higher rate

To check that a loan can remain affordable if interest rates rise, lenders use a serviceability rate above the actual product rate. This buffer and each lender's expense assumptions mean two lenders may return different borrowing figures for the same household.

Make your estimate more useful

Use a borrowing calculator for an indicative starting point, then compare the result with repayments you are comfortable making. Before applying, avoid taking on new debt and collect current income, expense and liability documents. A broker can compare policies where your income is variable or your situation is more complex.