Does HECS or HELP Debt Affect How Much You Can Borrow for a Home?

Yes, a HECS-HELP or other HELP debt can affect how much you may be able to borrow for a home because compulsory repayments can reduce the income available for servicing a mortgage. Lenders generally consider HELP repayment obligations when assessing income, expenses and borrowing capacity. Having a HELP debt does not automatically prevent you from obtaining a home loan. The effect varies according to your income, repayment obligations, other debts, living expenses and the lender’s assessment criteria.

What Is HECS-HELP Debt?

HECS-HELP is part of Australia’s Higher Education Loan Program (HELP). It allows eligible students enrolled in Commonwealth supported places to defer some or all of their student contribution amount through a HELP loan. Depending on a person’s study arrangements, they may have another type of HELP debt rather than HECS-HELP. These debts operate differently from conventional personal loans. HELP debts do not generally require fixed monthly repayments in the same way as a car loan or personal loan. Instead, compulsory repayments are linked to repayment income once the applicable threshold and requirements are met. Although the structure is different, a HELP repayment obligation can still be relevant when applying for a home loan.

Why Do Lenders Consider HELP Debt?

When assessing a home loan application, lenders generally consider whether the borrower appears able to meet the proposed repayments alongside existing financial commitments and living expenses. If you are required to make compulsory HELP repayments, those repayments reduce the amount of income available for other expenses and debt repayments. For this reason, a lender may include your HELP repayment obligation when calculating serviceability. The exact method used can differ between lenders.

Does HECS-HELP Reduce Your Borrowing Capacity?

It can. Borrowing capacity is an estimate of how much a lender may be prepared to lend based on its assessment criteria. Income is an important part of this calculation, but it is not the only consideration. Existing debts, credit limits, household expenses, dependants and proposed loan repayments can also influence the assessment. Where HELP repayments reduce the income available to service a home loan, the amount a lender is prepared to offer may be lower than it would otherwise be, assuming other circumstances remain unchanged. However, the impact is individual and should not be assumed without an assessment. See how lenders assess borrowing power and what can influence it.

Does the Size of Your HELP Balance Matter?

The outstanding balance can be relevant, but it is not necessarily the only factor affecting home loan serviceability. Compulsory HELP repayments are linked to repayment income under the applicable rules. As a result, two people with different HELP balances but similar repayment incomes could potentially have similar compulsory repayment obligations for a particular period. However, the remaining balance can still matter. For example, someone who is close to fully repaying their HELP debt may be in a different position from someone whose debt is expected to remain outstanding for considerably longer. Lender policies on how these circumstances are assessed can vary.

Can HELP Debt Stop You From Getting a Home Loan?

Having a HELP debt does not automatically mean a home loan application will be declined. Many factors can form part of a lender’s assessment, including income, employment, expenses, other liabilities, credit history, deposit, property value and the proposed loan amount. HELP repayments may be one component of that broader assessment. Loan approval remains subject to the lender’s eligibility requirements, serviceability calculations, credit assessment, property valuation and other applicable criteria.

Does Paying Off HELP Debt Increase Borrowing Capacity?

Paying off a HELP debt may change a person’s compulsory repayment obligation and could therefore affect a lender’s serviceability calculation. However, it should not be assumed that voluntarily repaying HELP debt will automatically increase borrowing capacity by a particular amount or result in home loan approval. Using savings to repay the debt can also reduce the cash available for a property deposit, purchase costs or financial reserves. The outcome depends on factors including the remaining HELP balance, income, available savings, proposed home loan and lender policy. For this reason, borrowers considering a voluntary HELP repayment specifically to support a home loan application may wish to understand the potential lending and taxation implications before transferring funds.

What If You Only Have a Small HELP Balance Remaining?

A relatively small remaining HELP balance may be worth identifying during the home loan assessment process. Depending on the lender’s policy and the applicant’s circumstances, the treatment of a debt that is close to being fully repaid may differ from a larger ongoing obligation. However, borrowers should not repay the remaining balance solely on the assumption that doing so will produce a particular lending outcome. A broker or lender can explain how the relevant institution treats the HELP obligation within its assessment.

What If You Are Applying With a Partner?

For a joint home loan application, lenders generally consider the financial circumstances of both applicants. If one or both applicants have HELP debts, the relevant repayment obligations may form part of the overall serviceability assessment. At the same time, the lender may also consider both applicants’ eligible income, expenses, other liabilities and dependants. The effect of HELP debt on a joint application therefore depends on the combined circumstances rather than simply whether one applicant has student debt.

Don’t Focus Only on the Maximum Loan Amount

Borrowing capacity is not the same as a personal budget. A lender’s maximum approved loan amount is based on its credit and serviceability assessment. It does not determine how much an individual household should spend on a property or how comfortable future repayments will be. Households may also need to consider other expenses and the possibility that interest rates, income or living costs could change. Understanding the difference between lender-assessed borrowing capacity and your own financial circumstances is important when planning a property purchase. Explore the key factors that can influence how much you may be able to borrow.

Can Different Lenders Assess HELP Debt Differently?

Lenders use their own credit policies and serviceability models within applicable regulatory requirements. This means the effect of a HELP debt on borrowing capacity may not be identical across every lender. Differences in the treatment of income, expenses, existing liabilities and other application details can also affect the overall assessment. This does not mean one lender will necessarily approve more than another for a particular borrower. Lending policies can change, and every application remains subject to assessment.

A HECS-HELP or other HELP debt can affect how much you may be able to borrow for a home because compulsory repayments can reduce the income available to service a mortgage. However, having HELP debt does not automatically prevent someone from qualifying for a home loan. Its impact depends on the applicant’s income, repayment obligations, expenses, other debts and the lender’s assessment methodology. If you are considering repaying HELP debt before applying for a home loan, avoid assuming that doing so will automatically improve your borrowing position. Understanding how the relevant lender treats the debt, and considering the effect of using savings to repay it, can provide a clearer picture before making a decision.