How Does a HECS Debt Affect How Much I Can Borrow for a Home Loan?
A $60,000 HECS balance can reduce borrowing capacity by $30,000–$80,000 depending on your income — not because of the balance, but because the compulsory repayment reduces the income available to service a mortgage.
HECS has a larger effect on borrowing capacity than most people realise — particularly at higher incomes where mandatory repayment rates climb steeply. It’s not the debt itself that creates the problem. It’s the monthly repayment that lenders deduct from your usable income.
How Lenders Treat HECS
Lenders look at your gross income and then subtract mandatory HECS repayments before calculating what you can service. At $100,000, the mandatory rate is around 4.5%, adding up to $4,500 per year or $375 per month deducted from your serviceable income.
Income-Based Repayment Rates in 2025–26
- Below $54,435: no repayment required
- $54,435–$62,738: 1–2% of income
- $80,001–$100,000: 4–5.5% of income
- Above $130,493: 8–10% of income
Paying Off HECS Before Applying — Does It Help?
If you have the cash to clear your HECS balance before applying, it will improve your borrowing capacity. Whether it improves it by more than keeping that cash as deposit is worth modelling before you decide. The answer changes depending on your balance, income, and the loan amount you’re targeting.
You may wish to speak with a licensed mortgage broker to assess your personal circumstances.
This is general information only. HECS repayment rates are reviewed annually by the ATO and can change. Speak with a licensed mortgage broker for advice tailored to your circumstances. All loans are subject to lender approval.
Sources: ATO, Study and Training Loan Repayment Rates 2025–26; APRA Prudential Practice Guide APG 223; ASIC MoneySmart, Borrowing Capacity 2025.
