Does HECS Debt Affect How Much I Can Borrow?

Does HECS Debt Affect How Much I Can Borrow for a Home Loan?

The Quick & Dirty: Yes. If you have a HECS/HELP debt, it can reduce how much you can borrow for a home loan because your compulsory repayments reduce the income you have available to repay a mortgage.

But before you start transferring your savings to the ATO, there’s a bit more to it.

Why does HECS/HELP affect my borrowing capacity?

Say you earn a good salary, have a decent deposit saved and don't have much other debt.

You might assume your HECS/HELP won't matter much.

But when a bank works out how much you can borrow, it looks at the income you have available after your existing financial commitments.

HECS/HELP repayments are generally included in that assessment because they're deducted from your income and that money isn't available to make your mortgage repayments.

APRA specifically recognises this in its guidance to Australian banks.

Does the amount of HECS/HELP I owe matter?

This is where it gets interesting.

Your compulsory HECS/HELP repayments are based primarily on your income, rather than simply how large your balance is.

From the 2025–26 financial year, compulsory repayments moved to a marginal system. You only make compulsory repayments once your repayment income reaches the relevant threshold, and the repayment is calculated differently depending on your income.

See the current HECS/HELP repayment rates from the ATO

So having a $40,000 HECS/HELP debt doesn't simply mean a bank deducts $40,000 from the amount you can borrow.

That's not how it works.

What if I only have a small amount of HECS/HELP left?

This is worth checking.

APRA has changed its guidance to allow lenders some flexibility where your HECS/HELP debt is expected to be completely repaid in the near future.

APRA has said it wouldn't be unreasonable for a lender to make an exception where the HECS/HELP debt is expected to be fully repaid within around 12 months through compulsory repayments.

That doesn't mean every bank will treat it exactly the same way. Lenders still have their own policies and need to assess your individual situation.

But if you're down to the last little bit of your HECS/HELP debt, tell your broker. It could be relevant.

Should I pay off my HECS/HELP before applying for a home loan?

Nahhh.

This is where I'd want to look at your numbers first.

Imagine you've finally saved $60,000 towards buying your first home and you have $15,000 of HECS/HELP debt remaining.

Using $15,000 of your savings to clear your HECS/HELP debt might improve your borrowing position but now you've also got $15,000 less cash available for your purchase.

Which one matters more in your situation?

That's the calculation I'd want to do before you move the money.

Didn't the government reduce HECS debt?

Yep, they did.

The Australian Government applied a one-off 20% reduction to eligible HECS/HELP and other student loan debts, benefiting more than three million Australians.

The repayment system also changed, with the minimum repayment threshold increasing and compulsory repayments moving to the marginal system.

But having a HECS/HELP balance can still affect a home loan assessment because compulsory repayments may reduce the income available to service your mortgage.

Can I still get a home loan if I have HECS/HELP?

Absolutely. Yes. 100%

Having HECS/HELP doesn't mean you can't buy a home.

It simply becomes one of the things we look at alongside your income, deposit, living expenses, credit cards, car loans and any other financial commitments.

If you've got HECS/HELP and you're starting to think about buying, I'd rather work out its impact before you start changing anything.

Because sometimes paying it off could help.

Sometimes your cash is more useful somewhere else.

And sometimes it isn't the thing limiting your borrowing capacity in the first place.

If you want to know how your HELP debt affects your numbers, book a chat with Eshanee from April Six by clicking here.

We'll run the numbers before you start throwing your house deposit at your HECS/HELP debt.

Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.

April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253

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Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.

📱 0488 471 888 | @eshanee_thebroker | aprilsix.com.au