If you've got a HECS or HELP debt and you're trying to buy your first home, there's a worry that probably keeps surfacing: does my HECS stop me buying a house? The short answer is no. People with HECS debt get approved for home loans every single day. It won't decide whether you qualify. It just trims how much you can borrow.
And here's the part most articles get wrong, including ones written by banks: the size of your HECS balance barely matters. So does HECS affect your home loan? Yes, but through your compulsory repayment, not your balance. And since 1 July 2025 that repayment is smaller for most people, which means the hit to your borrowing power is smaller too. If you want your real number rather than a scary guess, the borrowing power calculator factors HECS in for you.
How HECS affects your home loan borrowing power
HECS reduces your borrowing power the same quiet way any fixed monthly outgoing does: it shrinks the income the bank counts as available for a mortgage. When a lender works out what you can borrow, they take your income and subtract everything you're committed to paying each month, including rent, car loans, credit card limits, childcare and your HECS repayment. Whatever's left over is what they'll lend against.
The thing to hold onto is that HECS isn't a normal debt. It doesn't sit on your credit file, there's no minimum monthly payment you can default on, and it isn't a credit limit hanging over you. Lenders treat it as a living-expense commitment, because that's effectively what the compulsory repayment is: money skimmed off your pay before it reaches your account.
That's why the balance is almost beside the point. Whether you owe $15,000 or $80,000, your compulsory repayment is exactly the same for the same income, because the repayment is worked out from what you earn, not what you owe. Two people on $80,000 repay the identical amount even if one of them has triple the debt of the other. So the lever that moves your borrowing power isn't the size of the debt. It's the repayment, and the repayment is driven by your income.
What changed in 2025 (and why HECS bites less now)
Three real changes landed in 2025, and together they mean HECS pulls down your borrowing power less than it used to. If you've read an article that talks about repayment rates running from "1% to 10% of your whole income," that system was scrapped on 30 June 2025. Here's what replaced it.
1. A new, smaller repayment system. From the 2025-26 financial year, you pay nothing on the first $67,000 you earn, then 15 cents on each dollar above that, up to $125,000. Above $125,000 it's $8,700 plus 17 cents in the dollar, and only the highest earners sit near the old 10%. Because you're only charged on income above the threshold and not your entire salary, most people's annual repayment dropped. That smaller repayment is exactly what feeds into your borrowing power, so the borrowing-power hit got smaller too.
2. A one-off 20% wipe. The Government applied a one-off 20% reduction to HELP balances as they stood on 1 June 2025, before that year's indexation. You didn't have to apply for it. The ATO did it automatically, with most reductions processed across late 2025 and early 2026 and more complex cases taking longer. On an average debt of around $27,000, that's roughly $5,400 gone. It's a nice cut to your balance, but notice what it doesn't do: because the borrowing-power impact comes from your repayment rather than your balance, a smaller balance on its own usually doesn't change what you can borrow.
3. Banks were told to treat HECS differently. From 30 September 2025, APRA (the regulator that sets the rules banks lend by) confirmed two things. First, banks now leave HELP debt out of the debt-to-income figure they report. Second, and this is the honest bit the AI summaries tend to blur: lenders may leave your HECS repayment out of their serviceability assessment if the debt will be cleared within about 12 months. That's the situation behind the phrase you'll see floating around that HECS is "not included" in a home loan. But it's not a blanket exemption. APRA's own position is that the baseline expectation is for banks to keep counting your HECS repayment as an expense, and the within-a-year carve-out is the exception, not the rule. For most buyers who aren't within striking distance of paying it off, the repayment still counts.
Where this gets practical: lenders apply that 12-month rule differently, and some are more generous than others about HECS overall. That's genuinely a job for a broker, who deals with the policies daily and knows which lenders are friendliest for someone in your spot. If you don't have one yet, you can find a broker through NestPath at no cost.
How much does HECS actually cut your borrowing power?
HECS typically cuts your borrowing power by roughly 10 times your annual repayment, so for many first-home buyers that's tens of thousands of dollars rather than the six-figure hit older articles claim. Let's put real numbers on it, because how much HECS affects borrowing power is the question everyone actually wants answered. The repayment formula for 2025-26 is simple: 15 cents for every dollar you earn above $67,000 (within the first bracket).
Take someone on $80,000. Their compulsory repayment is 15c x ($80,000 minus $67,000) = $1,950 a year, or about $163 a month. Under the old whole-of-income system, the same person would have been repaying roughly twice that. That smaller monthly figure is what the bank deducts, so straight away the dent in your borrowing power is smaller than the figures you'll read in articles written before the change.
Brokers often use a rough rule of thumb that every $1 of annual loan repayment knocks around $10 off your borrowing power, so a $1,950-a-year HECS repayment trims somewhere in the ballpark of $15,000 to $20,000, not the $60,000-plus that balance-driven articles love to quote. Treat that as a rule of thumb, not a promise: the real number depends on the lender, your income, your other expenses and the assessment rate of the day.
Here's an indicative guide across a range of incomes. These are estimates only, built off the ATO repayment formula and that 10x rule of thumb, and every lender will land on a slightly different figure. For your actual number, run it through the borrowing power calculator.
- $70,000 income: approx. $450/yr repayment, borrowing power down roughly $4,000 to $5,000
- $80,000 income: approx. $1,950/yr repayment, down roughly $15,000 to $20,000
- $95,000 income: approx. $4,200/yr repayment, down roughly $40,000 to $45,000
- $110,000 income: approx. $6,450/yr repayment, down roughly $60,000 to $65,000
- $125,000 income: approx. $8,700/yr repayment, down roughly $85,000 to $90,000
- $150,000 income: approx. $12,950/yr repayment, down roughly $125,000 to $135,000
Read those rows top to bottom and the real story jumps out: the reduction climbs with your income, and your balance is nowhere in the table. That's the whole point. A higher earner feels HECS more because they repay more, not because they owe more.
One more thing worth weighing while you're here: if you've got spare cash, is it better used clearing HECS or sitting in your deposit? A bigger deposit can lift you over the 20% mark and dodge Lenders Mortgage Insurance entirely, which can be worth more than shaving a HECS repayment. It's worth modelling both with the LMI calculator and the deposit tracker before you decide where the money goes.
Should you pay off your HECS before applying?
Paying off your HECS before applying usually isn't worth it, with one exception: clearing the debt entirely, or getting it small enough to vanish inside a lender's 12-month window, is the only move that reliably lifts your borrowing power. The trap people fall into is making a small voluntary payment and expecting their borrowing power to jump. It almost never does, because the impact comes from the repayment, and your repayment doesn't change until either the debt is gone or it's small enough to clear within your lender's window.
Paying it off (or down to near-zero) can make sense if:
- Your balance is already small, close enough that clearing it, or getting it under the 12-month rule, could let a lender drop the repayment from your assessment.
- You've got surplus cash after a healthy deposit and emergency buffer, and you're chasing every last dollar of borrowing power.
- You're right on the edge of a price bracket and that final bit of capacity is the difference between the home you want and the one you'll settle for.
Keeping your HECS usually makes more sense if:
- Paying it down would gut your deposit or your safety net. HECS is one of the cheapest "debts" you'll ever hold.
- The payment you'd make is only a partial dent. A voluntary chunk that doesn't clear the debt typically moves your borrowing power by nothing.
- You'd otherwise tip below a 20% deposit and trigger LMI, in which case the cash is usually better off protecting your deposit.
The 2025 changes tilt this further toward "keep it." The 20% wipe already shrank balances for free, and HECS is indexed each year to the lower of inflation (CPI) or wage growth (WPI), so it grows gently rather than aggressively (indexation applies annually, and the rate varies). Rushing to overpay is a weaker play than it was a couple of years ago. If you do decide to chip away at it, you can make voluntary repayments any time through the ATO. And if it's other commitments quietly eating your capacity, our piece on how a credit card can kill your borrowing power is worth a read, because that limit often does more damage than your HECS.
How to check your HECS balance
To check your HECS balance, log into myGov, go to the linked ATO service, and look under study and training loans. Your current HECS-HELP balance is right there. Get the real figure before you plug a number into any calculator.
One caveat for 2026: the 20% reduction credit landed on most accounts across late 2025 and early 2026, with some complex cases taking longer. So double-check the figure on screen is the reduced balance and not a pre-cut number, especially if you haven't logged in for a while. Once you've got the right figure, the natural next step is to see what it means for your loan: drop it into the borrowing power calculator for an honest number.
Where to go from here
HECS is rarely the thing standing between you and a home loan. It nudges your borrowing power down through your repayment, the 2025 changes softened that nudge for most people, and the real lever is your income, not your balance. A few sensible next steps:
- Get your personalised number with the borrowing power calculator, which accounts for HECS automatically.
- See where this fits in the bigger picture on your journey to buying.
- When you're ready to talk lenders, find a broker who knows which ones treat HECS most kindly.
Frequently Asked Questions
Does HECS show on my credit file or affect my credit score?
No. HECS-HELP is a government loan administered through the tax system, not the credit-reporting system. It doesn't appear on your credit file and it doesn't affect your credit score. Lenders only see it because you disclose it and it shows in your income, not because a credit check flags it.
Can you get a home loan with a HECS debt?
Yes. Lenders approve home loans for people with HECS debt every day. A HECS debt reduces how much you can borrow, not whether you qualify. As long as the loan you're after still fits inside your borrowing power once your HECS repayment is counted, the debt won't block your application.
Does paying off my HECS increase my borrowing power?
Sometimes, but not always, and rarely off a small payment. Because the impact comes from your compulsory repayment, a partial voluntary payment usually changes nothing. What can lift your borrowing power is clearing the debt entirely, or paying it down far enough that a lender will treat it as repayable within about 12 months and leave the repayment out of their assessment.
Should you pay off HECS before buying a house?
Usually not, but it depends. A small voluntary payment almost never moves the needle, because your borrowing power is driven by your compulsory repayment rather than your balance. Only clearing the debt, or dropping it under a lender's roughly 12-month rule, reliably changes what you can borrow. With the one-off 20% reduction already shrinking balances, rushing to overpay is a weaker play than it used to be.
Do all banks treat HECS the same way?
No. Since APRA's September 2025 changes, lenders vary in how they handle HECS. Some will now exclude the repayment from serviceability if the debt will clear within roughly a year, while others keep counting it. The differences can be worth tens of thousands in borrowing power, which is exactly where a broker earns their keep: they'll point you to the most HECS-friendly lender for your situation.
