If you have a HECS or HELP debt and you are trying to buy your first home, there is something important you need to understand — and most people discover it too late.
Your HECS debt is reducing how much you can borrow. Significantly.
How Banks Assess HECS Debt
When a lender calculates your borrowing capacity, they look at your income minus all your financial commitments. HECS repayments are one of those commitments.
HECS repayments are income-contingent — meaning the more you earn, the higher your mandatory repayment rate. For the 2025–26 financial year, repayment rates range from 1 percent of income at the lowest threshold up to 10 percent for high earners.
Banks assess your HECS repayment obligation as a monthly expense against your income. This directly reduces how much they are willing to lend you.
The Numbers — How Much Does It Actually Cost You?
The impact of HECS debt on borrowing power is more significant than most people expect.
A $50,000 HECS debt for someone earning $80,000 means mandatory repayments of approximately $4,000 per year — or $333 per month. Banks treat this as a fixed ongoing expense, reducing your borrowing capacity by approximately $60,000 to $80,000.
A $100,000 HECS debt on the same income could reduce your borrowing power by $120,000 to $150,000.
The impact varies based on your income level and which lender you use, as different lenders assess HECS differently.
What Can You Do About It?
Option 1 — Voluntary HECS repayments
You can make voluntary payments to reduce your HECS balance at any time through the ATO. Reducing your balance reduces your assessed repayment obligation and therefore increases your borrowing capacity. Whether this is worthwhile depends on your interest rate environment — HECS debt is indexed to CPI, so in high inflation periods the real cost of holding HECS debt increases.
Option 2 — Use a broker who understands HECS
Different lenders assess HECS debt differently. Some lenders use a more favourable calculation that has a smaller impact on your borrowing capacity. A good mortgage broker will know which lenders are most HECS-friendly for your specific situation.
Option 3 — Increase your income
Since HECS repayments are income-based, a higher income means a higher repayment rate — but your borrowing capacity may still increase overall because the income increase typically outweighs the HECS repayment increase.
Option 4 — Factor it in from the start
Rather than being surprised at the broker's office, calculate your real borrowing capacity including your HECS debt upfront. NestPath's borrowing capacity calculator factors in your HECS balance automatically and shows you your honest number.
How to Check Your HECS Balance
Log into myGov and access your ATO account. Your current HECS-HELP balance is shown under study and training loans. This is the figure you should enter into any borrowing capacity calculator.
Find out your real borrowing capacity including HECS using NestPath's free calculator.
Frequently Asked Questions
What do first home buyers need before buying in Australia?
You need: a deposit (minimum 5% with the First Home Guarantee), proof of income and employment, identification documents, a clear understanding of your borrowing power, and a budget that includes stamp duty, legal fees, building inspections, insurance, and moving costs.
How much should I budget for upfront costs beyond my deposit?
Budget 3-5% of the purchase price for additional costs. On a $600,000 property that's $18,000-$30,000 for stamp duty (unless exempt), conveyancing ($1,500-$3,000), building inspection ($500-$800), home insurance, and connection fees.
Do I need a solicitor or conveyancer to buy a house?
Yes. A solicitor or conveyancer handles the contract review, title search, stamp duty, and settlement process. Never exchange contracts without professional legal advice — one missed clause can cost you thousands.
