How Does HECS-HELP Debt Affect Your Borrowing Capacity?
Does HECS-HELP Debt Affect Your Borrowing Capacity?
If you're thinking about buying a home but still have a HECS-HELP debt, you may be wondering whether your student debt will stop you from getting a mortgage.
The good news is that having a HECS-HELP debt does not automatically prevent you from getting a home loan.
However, it can affect how much you are able to borrow.
When a lender assesses your home loan application, they look at your income and expenses to determine whether you can comfortably afford the proposed repayments. Your compulsory HECS-HELP repayment can form part of this assessment, which may reduce your borrowing capacity.
Exactly how much it affects you will depend on your income, your HECS-HELP repayment obligation, your other debts and the lender you're applying with.
So, if you're carrying a HECS debt and planning to buy a home, it's worth understanding how it may affect your borrowing power before you start looking at properties.
What Is HECS-HELP?
HECS-HELP is a government loan that eligible students can use to help pay their student contribution amounts.
Rather than paying the full amount upfront, eligible students can defer the cost and repay the debt through the Australian tax system once their income reaches the relevant repayment threshold.
Your HECS-HELP debt is managed through the Australian Taxation Office (ATO), and compulsory repayments are based on your income.
You can also make voluntary repayments if you choose.
Importantly, HECS-HELP isn't the same as a traditional personal loan or credit card. There generally isn't a set monthly repayment that you make directly to the lender.
However, that doesn't mean lenders ignore it when assessing your home loan application.
Does HECS-HELP Reduce Your Borrowing Capacity?
It can.
The key issue isn't necessarily how much you owe in total.
Instead, lenders are generally interested in the impact your required HECS-HELP repayment has on your ongoing income and expenses.
For example, if two applicants have the same salary but one has a HECS-HELP debt resulting in a compulsory repayment, the applicant with the repayment may have less income available to meet their proposed mortgage repayments.
This can reduce the amount the lender is prepared to lend.
The actual impact can vary significantly between applicants and lenders.
Your HECS balance isn't necessarily the main factor
One common misconception is that having a large HECS balance automatically means you'll have significantly less borrowing power.
That's not necessarily the case.
A lender may be more concerned with the ongoing repayment obligation than simply the total amount of your HECS debt.
For example, someone with a $50,000 HECS balance isn't necessarily treated the same as someone with a $50,000 personal loan.
The structure of the debt and how repayments are calculated are different.
How Are HECS-HELP Repayments Calculated?
HECS-HELP repayments are linked to your income.
The repayment system changed from the 2025–26 income year, with repayments now calculated using a marginal approach rather than simply applying a percentage to your entire income once you cross the threshold.
For the 2026–27 income year, compulsory repayments start once repayment income exceeds $69,528.
The repayment amount increases as income increases.
This is important when you're applying for a home loan because an increase in your income can also increase your compulsory HELP repayment.
That means earning more doesn't always translate into the full increase in borrowing capacity you might expect.
The thresholds and repayment rates can change over time, so your actual repayment should always be checked against the current ATO or Australian Government information.
Example: How HECS Could Affect Borrowing Power
Let's say you earn a strong income and are looking to purchase your first home.
Without a HECS-HELP debt, a lender may assess your income as being fully available after considering your other commitments and living expenses.
If you have a HECS-HELP debt, however, part of your income may be allocated towards your compulsory student loan repayment.
That reduces the amount of income available for your proposed mortgage repayments.
The result could be a lower borrowing capacity.
But how much lower?
There isn't a single answer.
Your borrowing capacity will depend on things such as:
Your gross income
Your HECS-HELP repayment obligation
Your partner's income and debts
Existing personal loans
Car loans
Credit card limits
Buy Now, Pay Later accounts
Your living expenses
Number of dependants
Proposed loan amount
Interest rate and lender assessment rate
Loan term
The lender's individual credit policy
This is why an online borrowing calculator may not give you the same result as a lender's actual servicing assessment.
Can You Get a Home Loan With HECS-HELP Debt?
Yes.
Having a HECS-HELP debt doesn't mean you need to wait until it's completely paid off before buying a home.
In fact, many first home buyers have a HECS-HELP debt when they apply for their mortgage.
The important question is whether you can demonstrate that you can comfortably afford the proposed home loan after your existing financial commitments are taken into account.
Your broker or lender can assess your circumstances and determine how your HECS repayment is likely to affect your borrowing capacity.
Should You Pay Off Your HECS Before Applying for a Home Loan?
This is a question we hear regularly.
And the answer is: not necessarily.
It can be tempting to think that paying off your HECS debt will automatically increase your borrowing capacity.
It may help in some circumstances, but you need to consider the bigger picture.
If you use $30,000 of your savings to pay off your HECS debt, for example, you may reduce your ongoing repayment obligation — but you have also reduced the cash available for your:
Home deposit
Stamp duty and government costs
Conveyancing
Building and pest inspections
Moving costs
Emergency savings
Other upfront purchase costs
So while paying off HECS could potentially improve your servicing position, it may also leave you with less money available to complete the property purchase.
It's worth running the numbers before making a large voluntary repayment.
What If I Have Other Debts as Well as HECS?
HECS-HELP may be just one part of your overall financial position.
If you also have a car loan, personal loan, credit card or Buy Now, Pay Later accounts, these can all affect your borrowing capacity.
For example, paying off a relatively small personal loan could sometimes have a greater impact on your borrowing capacity than paying off your HECS debt.
Why?
Because a personal loan generally has a defined repayment that is taken into account as an ongoing financial commitment.
This is why it's important to look at your entire financial position, rather than focusing on your HECS balance alone.
Does HECS Affect Joint Home Loan Applications?
Yes, it can.
If you're applying for a home loan with a partner, the lender will generally consider both applicants' income and financial commitments.
If one or both applicants have HECS-HELP debt, the relevant repayment obligations can form part of the overall assessment.
For example, if you're buying a home with your partner and both of you have HECS debts, the combined impact may be greater than if only one applicant has a student loan.
However, the effect will depend on your individual incomes and the lender's servicing methodology.
What If My HECS Repayments Are Coming Directly Out of My Pay?
If you have a HECS-HELP debt and earn above the relevant repayment threshold, your employer may withhold additional amounts from your pay through PAYG withholding.
This can sometimes make it feel like your take-home pay is lower than expected.
From a home loan perspective, the important thing is that the lender needs to understand your actual income position and existing financial commitments.
Your broker can help ensure the application reflects your circumstances accurately.
What If I'm About to Pay Off My HECS Debt?
If you're close to paying off your HECS debt, it may be worth considering the timing carefully.
For example, if your remaining balance is relatively small, paying it off could potentially remove the ongoing compulsory repayment.
However, if doing so would significantly reduce your deposit or available savings, it may not be the best option.
There can also be timing considerations around when the ATO updates your records and when the repayment is reflected in your circumstances.
Don't assume that paying off HECS immediately before applying for a home loan is automatically the best strategy.
It's worth discussing the numbers first.
How Can You Improve Your Borrowing Capacity If You Have HECS?
If HECS is reducing your borrowing power, there are other ways you may be able to improve your position.
1. Reduce other debts
Car loans, personal loans and credit card limits can all affect borrowing capacity.
Reducing or closing unnecessary debts may improve your borrowing position.
2. Review your credit card limits
Even if you don't owe anything on your credit card, the credit limit can still be considered by lenders when assessing your ability to service a mortgage.
If you have a large unused credit card limit, it may be worth reviewing whether you actually need it.
3. Avoid taking on new debt before applying
If you're planning to apply for a home loan, think carefully before taking out a new car loan, personal loan or other credit facility.
A new financial commitment could reduce your borrowing capacity.
4. Make sure your income is correctly documented
If you've recently received a pay rise, changed jobs or moved into a higher-paying role, your updated income may improve your borrowing position.
Your lender will need to determine what income they can use and how it can be verified.
5. Compare lender policies
Not every lender assesses applications in exactly the same way.
This is one area where speaking with a mortgage broker can be useful.
Rather than assuming you can't borrow enough because you have HECS, a broker can look at your circumstances and compare potential lender options.
Does HECS Affect First Home Buyers?
It can, but it doesn't mean you can't buy your first home.
In fact, HECS-HELP debt is particularly common among younger Australians who are entering the property market.
The key is understanding how your student loan repayment interacts with your income and the lender's servicing calculations.
If you're planning to use a government first home buyer scheme or a low-deposit option, there may also be additional eligibility requirements to consider.
Your HECS debt is only one part of the overall application.
Common Questions About HECS and Home Loans
Does having HECS stop me from getting a mortgage?
No. Having a HECS-HELP debt does not automatically prevent you from getting a home loan.
The lender will consider the impact of your required repayment when assessing your overall ability to service the loan.
Does HECS reduce my borrowing capacity?
It can.
Your compulsory HECS-HELP repayment can reduce the amount of income available to meet your proposed mortgage repayments, which may reduce your borrowing capacity.
Should I pay off HECS before buying a house?
Not necessarily.
Paying off HECS may improve your ongoing cash flow, but using your savings to clear the debt could reduce the amount you have available for your deposit and other property purchase costs.
It's worth comparing both scenarios before making a decision.
Does HECS affect my partner's borrowing capacity?
If you're applying for a joint home loan, the lender generally considers both applicants' financial positions. A HECS repayment can therefore affect the overall borrowing capacity of a joint application.
Can I get a home loan if I still have a large HECS debt?
Yes.
The size of your HECS balance doesn't automatically mean you can't qualify for a mortgage. Your income, repayment obligation, other debts, expenses and the lender's policy will all be relevant.
Will paying off HECS increase my borrowing capacity?
It potentially can, because removing the compulsory repayment may improve your ongoing cash flow.
However, using savings to pay off HECS can also reduce your deposit or available funds, so it's important to consider both sides.
Why Choose Formulate Finance Group?
Buying a home can feel complicated enough without trying to work out how HECS-HELP, lender servicing calculations and borrowing capacity all fit together.
At Formulate Finance Group, we can help you understand how your HECS-HELP debt may affect your borrowing position and look at the overall picture — not just your student loan balance.
We can help you:
Estimate your borrowing capacity
Review your existing debts and commitments
Consider whether paying off debt could help
Compare suitable home loan options
Understand your upfront costs
Work out what price range may be realistic
Prepare your application and supporting documents
Whether you're a first home buyer or you're looking to upgrade, refinance or invest, understanding your borrowing capacity before you start house hunting can save you a lot of time and disappointment.
Final Thoughts: Don't Let HECS Stop You From Exploring Your Options
Having a HECS-HELP debt doesn't automatically mean you need to put your home ownership plans on hold.
It may affect your borrowing capacity, but the impact will depend on your income, repayment obligation, other debts, expenses and the lender you apply with.
And importantly, you don't necessarily need to pay off your HECS before applying for a home loan.
Before making a large voluntary repayment, it's worth working out whether doing so will genuinely improve your overall position — or simply leave you with a smaller deposit.
If you're unsure how much you could borrow with your HECS debt, getting an assessment early can give you a much clearer picture of your options.
Ready to find out how much you could borrow?
Get in touch with Formulate Finance Group to discuss your borrowing capacity and home loan options.
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