Yes — HECS-HELP debt affects your borrowing capacity for a home loan in Australia. While it does not appear on your credit file, lenders assess your compulsory HECS repayments as a recurring liability that reduces your disposable income and therefore how much you can borrow.
How Lenders Treat HECS Debt
When assessing a home loan application, lenders calculate your Net Disposable Income (NDI) — the income available after all expenses and debt repayments. HECS compulsory repayments are included as a recurring expense, the same as rent, car repayments, or credit card minimums.
Lenders typically:
- Ask on the application form whether you have a HECS-HELP or other study loan debt
- Include the compulsory repayment amount as a monthly liability
- Use the ATO’s repayment rates to estimate the liability based on your income
How Much Does HECS Reduce Borrowing Capacity?
The impact varies by lender and by how much your HECS repayments are. As a rough guide:
| Annual Salary | HECS Rate | Annual Repayment | Approx. Borrowing Capacity Reduction |
|---|---|---|---|
| $60,000 | 1.0% | $600 | ~$4,000–$6,000 |
| $80,000 | 4.0% | $3,200 | ~$20,000–$25,000 |
| $100,000 | 6.0% | $6,000 | ~$40,000–$50,000 |
| $120,000 | 7.5% | $9,000 | ~$55,000–$70,000 |
Estimates only. Actual impact depends on lender serviceability models, interest rate buffers, and other expenses.
Does Paying Off HECS Improve Borrowing Capacity?
Paying off HECS-HELP debt before applying for a mortgage can increase your borrowing capacity by removing the repayment liability from the lender’s assessment. The benefit is roughly proportional to the compulsory repayment amount.
For example, if you have a $3,000/year HECS repayment and you pay off the debt, your borrowing capacity may increase by approximately $15,000–$20,000 depending on the lender and prevailing interest rates.
HECS vs Credit File
HECS-HELP debt does not appear on your credit file with credit reporting agencies (Equifax, Experian, illion). However, lenders still ask about it on the application form and include it in their serviceability calculations. Failing to disclose your HECS debt on a loan application can constitute misleading conduct.
HECS and the First Home Guarantee
If you are applying for the First Home Guarantee (FHBG) or other government schemes, HECS debt is still included in the lender’s serviceability assessment. Having HECS debt does not disqualify you from government schemes, but it does reduce how much you can borrow.
Strategies to Consider
- Pay off HECS before applying — if the debt is manageable, eliminating it can improve borrowing capacity
- Time your application — if you are close to paying off HECS through compulsory repayments, waiting until it is cleared removes the liability
- Speak with a mortgage broker — different lenders treat HECS differently; a broker can help identify lenders with more favourable serviceability assessments
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Frequently Asked Questions
Does HECS debt affect getting a home loan? Yes. Lenders include your compulsory HECS repayments as a liability in their serviceability assessment. This reduces your effective disposable income and therefore how much you can borrow.
Does paying off HECS help with a mortgage? Paying off HECS removes the repayment liability from the lender’s assessment and may increase your borrowing capacity. The benefit depends on the amount of your repayments and the lender’s serviceability model.
Do I need to disclose HECS on a home loan application? Yes. Lenders ask about study loans on their application forms and you must answer honestly. Failing to disclose can constitute misleading conduct.
This article provides general financial information for FY2025–26. For advice tailored to your situation, speak with a mortgage broker or financial adviser. Find one through ASIC’s MoneySmart.