Home Loan with HECS Debt? Here's How to Secure Approval

Are you a recent graduate eyeing the Australian property market, but worried that your HECS debt will stand in the way of securing a home loan? You’re not alone. Many Australians with higher education debt grapple with the question: can you get a home loan with a HECS debt? The answer is yes, but understanding how your debt impacts your borrowing capacity and knowing how to navigate the lending landscape can make all the difference.

Understanding HECS Debt and Home Loans

The Higher Education Contribution Scheme (HECS), now part of the Higher Education Loan Program (HELP), is a loan system designed to assist eligible students in covering their university fees. While this system facilitates access to education, it can also influence your financial standing, especially when you're planning to apply for a home loan.

HECS debt is unique because you don't have to make repayments until your income reaches a certain threshold, which, as of 2026, starts at $51,550. This debt is indexed annually in line with the Consumer Price Index (CPI), meaning it grows with inflation. Lenders consider this when determining your borrowing capacity, as your HECS repayments are part of your financial obligations.

Impact of HECS Debt on Home Loan Eligibility

When applying for a home loan, lenders assess your financial situation comprehensively. Your HECS debt is one of several factors that can impact your borrowing capacity and the terms of your loan.

Factor	Impact on Loan	Details
HECS Debt	Reduced Borrowing Capacity	Repayments are factored into your debt-to-income ratio.
Income	Higher Income Increases Capacity	Stable, sufficient income can mitigate the effects of HECS debt.
Credit Score	Determines Loan Terms	Good credit can offset some negative impacts of HECS debt.

Interest rates for home loans in Australia currently range from 6.49% to 12%, depending on your financial profile, lender, and market conditions. Lenders also consider the size of your deposit, employment stability, and other debts. For those with HECS debt, showcasing financial stability and a solid repayment history can improve your chances.

Steps to Secure a Home Loan with HECS Debt

Despite the challenges, obtaining a home loan with HECS debt is entirely possible. Here’s a step-by-step guide to help you on your journey:

1. Assess Your Financial Situation: Begin by understanding your current financial standing. Calculate your HECS debt repayments and how they affect your monthly budget.
2. Improve Your Credit Score: Pay bills on time, reduce existing debts, and ensure your credit report is accurate, as a good credit score can enhance your borrowing capacity.
3. Save for a Larger Deposit: A larger deposit can reduce the loan-to-value ratio (LVR) and make you a more attractive candidate to lenders.
4. Consult a Mortgage Broker: Work with a reputable mortgage broker like Esteb and Co, who have access to 83+ lenders and can find options tailored to your circumstances.
5. Gather Documentation: Prepare your financial documents, including proof of income, expenses, and a HECS repayment schedule.
6. Apply for Pre-Approval: Secure a pre-approval to understand how much you can borrow and begin house hunting with confidence.

Expert Tips and Considerations

Here are some expert tips to maximise your home loan prospects despite having a HECS debt:

• Regularly Review HECS Repayments: Ensure you’re aware of changes in your HECS repayment requirements as your income increases.
• Consider Fixed vs Variable Rates: Evaluate whether a fixed or variable interest rate suits your financial strategy and stability.
• Explore First Home Buyer Grants: Check eligibility for grants and schemes that can improve affordability and reduce the financial burden.
• Be Honest with Lenders: Transparency about your financial situation, including HECS debt, helps lenders tailor options to your needs.
• Consider Joint Applications: If applicable, applying with a partner can increase your combined borrowing capacity.

Frequently Asked Questions

1. Does HECS debt affect my credit score?

No, HECS debt does not appear on your credit report and doesn't directly affect your credit score. However, it does impact your borrowing capacity.

2. How does HECS debt impact my borrowing capacity?

Lenders consider HECS repayments as part of your financial commitments, reducing the amount you can borrow for a home loan.

3. Can I pay off my HECS debt faster to improve my loan prospects?

Yes, paying off HECS debt faster can improve your financial profile, but ensure it doesn’t compromise your savings for a deposit.

4. Will lenders automatically reject my application due to HECS debt?

No, having a HECS debt alone won't lead to rejection. Lenders consider your overall financial health, including income and other debts.

5. What is the current income threshold for HECS repayments?

As of 2026, the minimum income threshold for HECS repayments is $51,550. This can change annually, so stay updated.

6. Are there specific lenders more favourable to borrowers with HECS debt?

Some lenders may be more accommodating. Consulting with mortgage brokers like Esteb and Co can help identify these lenders.

7. Can I still qualify for a first home buyer grant if I have HECS debt?

Yes, having HECS debt does not disqualify you from first home buyer grants. Eligibility depends on other criteria like property value and residency status.