Student Loans – Can They Block Your Dream Home?

Are you considering buying a home but worried that your student loan could be a stumbling block? Many Australians with student debt find themselves in this predicament, wondering if their Higher Education Loan Programme (HELP) debt will hinder their chances of securing a mortgage. In this blog post, we will explore how student loans can impact your mortgage application, what lenders look for, and how you can position yourself for success in the 2026 home loan market.

Understanding the Impact of Student Loans on Mortgage Applications

Student loans in Australia, often under the HELP scheme, are a common financial commitment for many young professionals. While they provide the opportunity to further education without upfront payment, they also become a long-term financial obligation. When applying for a mortgage, lenders will consider your overall financial situation, including any existing debts like your student loan. This can affect how much you're able to borrow and the terms of your mortgage.

Current Mortgage Rates and Lender Requirements

As of 2026, the mortgage market in Australia has seen some shifts. Interest rates for home loans generally range between 6.49% and 12%, depending on various factors such as the type of loan, the lender, and the borrower's credit profile. Lenders from Esteb and Co's panel of over 83 lenders each have their own criteria, but there are commonalities in what they look for:

• Income Stability: Lenders prefer applicants with steady employment and a reliable income stream.
• Debt-to-Income Ratio: This ratio is crucial. Lenders typically prefer it to be below 30-40% of your gross income.
• Credit Score: A strong credit history can enhance your borrowing capacity, while a poor score may limit it.
• Deposit Amount: The larger your deposit, the less risk the lender assumes, often resulting in better terms.

Here's a comparison of how different debts, including student loans, can affect your mortgage application:

Steps to Improve Your Mortgage Application

Even with a student loan, there are strategies you can employ to improve your chances of securing a home loan:

1. Review Your Credit Report: Obtain a copy of your credit report and check for errors. Correcting inaccuracies can improve your score.
2. Reduce Other Debts: Aim to pay down high-interest debts, such as credit cards, to improve your debt-to-income ratio.
3. Increase Your Income: Consider ways to boost your income, whether through a side job or negotiating a raise.
4. Save for a Larger Deposit: The more you can put down, the better your loan terms will likely be.
5. Consult a Mortgage Broker: Working with professionals, such as those at Esteb and Co, can provide access to a broad range of lenders and tailored advice.

Expert Tips and Considerations

Here are some additional tips from our experts at Esteb and Co to help you navigate the mortgage landscape with a student loan:

• Know Your Repayment Schedule: Understand how your student loan repayments align with your income and other expenses.
• Stay Informed: Keep up to date with any changes in student loan policies or interest rates that might affect your financial situation.
• Explore Different Loan Types: Consider fixed vs. variable rates, offset accounts, and other features that could benefit your financial strategy.
• Leverage Professional Advice: Use Esteb and Co's extensive network of lenders to find the most favourable terms for your specific situation.

Frequently Asked Questions

1. Can my student loan prevent me from getting a mortgage? While it can affect your borrowing power, a student loan alone is unlikely to prevent you from obtaining a mortgage if you meet other lender criteria.
2. Will paying off my student loan early help my mortgage application? It can improve your debt-to-income ratio, which is a positive factor for lenders.
3. Are there specific lenders more lenient towards student debt? Some lenders might be more flexible, and a mortgage broker can help identify these options.
4. How does my student loan affect my credit score? Student loans are usually reported as a debt obligation, but consistent repayments can positively impact your score.
5. Should I refinance my student loan before applying for a mortgage? This depends on the interest rates and terms. Consulting a financial advisor can help determine the best approach.
6. How do lenders view HELP debt differently from other debts? HELP debt is often seen as less risky because it is income-contingent and not subject to traditional credit scoring.
7. Can I include my student loan repayments in my mortgage budget? Yes, accounting for all expenses, including student loan repayments, can help you create a realistic budget.