Can I Buy a House With Student Debt (HECS) in Australia? (2026)
Yes — you can buy a house with HECS or student debt in Australia. HECS does not appear on your credit file and does not affect your credit score. However, HECS repayment obligations do reduce your borrowing capacity because lenders include your compulsory HECS repayment in their serviceability calculation.
How HECS Affects Your Home Loan
HECS-HELP debt is repaid through the tax system — once your income exceeds the minimum repayment threshold (approximately $54,435 in FY2024–25), you are required to repay a percentage of your income via your tax return.
Lenders add your compulsory HECS repayment to your existing expenses. This reduces the surplus income available for mortgage repayments — which reduces your maximum borrowing capacity.
How Much Does HECS Reduce Borrowing Power?
FY2024–25 compulsory repayment rates (examples):
| Annual income | Repayment rate | Annual HECS repayment | Monthly reduction |
|---|---|---|---|
| $60,000 | 1.0% | $600 | $50 |
| $70,000 | 2.0% | $1,400 | $117 |
| $80,000 | 2.5% | $2,000 | $167 |
| $90,000 | 3.0% | $2,700 | $225 |
| $100,000 | 3.5% | $3,500 | $292 |
| $120,000 | 4.5% | $5,400 | $450 |
Typical borrowing reduction: The monthly HECS repayment reduces borrowing capacity by approximately 4–5 times the annual repayment amount.
Example: $90,000 income, $2,700/year HECS repayment ($225/month) → borrowing capacity reduced by approximately $35,000–$45,000 compared to a borrower with zero HECS on the same income.
Importantly, the HECS balance itself does not matter — only the income-based repayment rate matters. A borrower with $10,000 in HECS and a borrower with $80,000 in HECS on the same income have the same impact on borrowing capacity.
Key Facts About HECS and Mortgages
✅ HECS does NOT appear on your credit file — no credit score impact
✅ HECS is not a “debt” in the traditional lending sense — it does not affect credit history or create a repayment obligation unless your income exceeds the threshold
✅ The HECS balance is irrelevant — lenders care about the income-based repayment
✅ All HELP scheme types are treated the same — HECS-HELP, FEE-HELP, VET Student Loans — all assessed identically through the ATO repayment system
Should I Pay Off HECS Before Applying for a Home Loan?
Whether paying off HECS before applying makes sense depends on your specific situation:
Paying HECS off first may help when:
- Your HECS balance is small (e.g., under $20,000) and you have savings to cover it without impacting your deposit
- The borrowing capacity improvement is material for your purchase goals
Keeping HECS is often more sensible when:
- Your HECS balance is large (e.g., $50,000+) — paying it off significantly impacts your deposit
- Your income repayment rate is low (under 3%) — the borrowing impact is modest
- HECS indexation in recent years has been moderate (FY2024–25 indexation: approximately 3.2%, down from the 7.1% spike in FY2022–23)
For a detailed analysis, see Pay Off HECS or Save for a House Deposit?
Frequently Asked Questions
My HECS balance is $45,000. Does this amount matter for my home loan?
The balance itself does not matter — only your income-based repayment rate. A $45,000 HECS balance and a $5,000 HECS balance on the same $85,000 income generate the same compulsory repayment and the same borrowing capacity impact. Focus on the repayment amount, not the balance.
I’m applying jointly with my partner. Do both HECS balances affect our joint borrowing capacity?
Yes — each applicant’s HECS repayment is deducted from their individual assessed income. If both partners have HECS, both repayments are factored in. This can reduce joint borrowing capacity more noticeably when both partners are on significant incomes with large HECS repayments.
Does HECS affect my ability to save a deposit?
Indirectly, yes — your HECS repayment reduces your after-tax take-home pay, which reduces the amount you can save each month. However, the repayment happens automatically through your tax return, so it may feel less significant than a direct ongoing repayment.
More HECS and Home Loan Guides
- Does HECS Affect Your Borrowing Power?
- How HECS Repayments Are Calculated for Borrowing
- Pay Off HECS Before Mortgage — or Save for a Deposit?
- HECS and Home Loans Hub
- Can I Get a Home Loan? — Eligibility Hub
This article provides general information about buying a home with HECS debt in Australia. For detailed advice on your borrowing capacity, speak with a licensed mortgage broker. Find one through MoneySmart.