A HECS/HELP debt does not stop you getting a home loan. Plenty of our clients buy with one. What it does is reduce how much you can borrow, because the compulsory repayment counts as an ongoing commitment — and that is a different problem with a different answer.
How lenders treat it
Your HECS repayment comes out of your pay automatically once income passes the threshold, and it steps up as income rises. Lenders count that repayment the way they count a car loan repayment: money that leaves your income before it can service a mortgage.
It is not treated as a debt in the credit-risk sense. There is no balance held against you, no interest rate, no default risk. Only the repayment matters.
Roughly what it costs
The repayment is a percentage of income that climbs through brackets. At a middle income that might be a few thousand dollars a year, which in borrowing terms often translates to somewhere around $30,000 to $60,000 less capacity — more on higher incomes, because the percentage rises.
Our tax calculator has a HECS tick box. Turn it on and off and you see the take-home difference immediately. That difference is roughly what the lender is subtracting.
Should you pay it off before buying?
Usually no. But it is worth checking rather than assuming either way.
The case against: HECS is indexed rather than charged interest, which has historically made it the cheapest debt most people will ever carry. Every dollar you put into it is a dollar not in your deposit, and deposit is usually the harder constraint. Clearing a $30,000 HECS debt to unlock perhaps $40,000 of capacity, while cutting your deposit by $30,000, often leaves you worse off overall.
The case for: if the balance is small — under $10,000, say — and you have deposit to spare, clearing it removes the repayment entirely and lifts capacity at the margin. It can also matter if you sit just above a repayment threshold.
The arithmetic is specific to your numbers, and where tax treatment comes into it, that is a question for your accountant rather than your broker.
Two things people get wrong
- Leaving it off the application. It appears on your payslips and your tax return. Lenders see it. Not disclosing it damages the file far more than the debt ever would.
- Assuming it blocks approval. It does not. It changes the maximum, not the answer.
What usually helps more
If HECS has pushed your capacity below what you need, the lever that moves further is normally somewhere else: unused credit card limits, a personal loan you could clear, or simply which lender you apply to. The spread between the most and least generous lender assessment is often wider than the HECS effect itself.
See the HECS impact on your take-home · First home buyer guide · Book a consultation
General information only — it does not take your objectives, financial situation or needs into account, and is not credit assistance or taxation advice. Figures are illustrative and depend on income, thresholds and the lender’s assessment. Easy Loan Finance is a Credit Representative (CRN 568863) of Beagle Finance Pty Ltd, Australian Credit Licence 383640.
