Mortgage with Student Debt? Here's How to Succeed

Are you dreaming of owning your own home but worried that your student loan debt will stand in the way? You're not alone. Many Australians find themselves in this predicament, trying to balance student loan repayments with the desire to step onto the property ladder. Fortunately, having student loan debt doesn't automatically disqualify you from getting a mortgage. Here's how you can navigate this financial landscape and achieve your homeownership goals.

Understanding Mortgages with Student Loan Debt

The thought of adding a mortgage to your existing student loan debt can be daunting. However, understanding the interplay between these two financial commitments is crucial. In Australia, lenders take into account your overall financial situation when assessing your mortgage application. This includes your income, expenses, debts, and credit history. Student loans, particularly HECS-HELP debts, are common among Australians and are treated differently than other personal debts.

HECS-HELP loans are unique because they are repaid through the tax system based on your income. This means lenders may assess them differently compared to traditional debts. Understanding how your student loan impacts your borrowing capacity is the first step in planning your path to homeownership.

Current Market Rates and Requirements

As of 2026, the Australian mortgage market offers a variety of options, with interest rates ranging from 6.49% to 12%, depending on the lender and type of loan. Lenders assess several factors when considering mortgage applications from individuals with student loan debt:

• Income: Your ability to service the mortgage is critical. Lenders typically look for a debt-to-income ratio below 45%.
• Credit Score: A good credit score can enhance your application. Aim for a score above 650.
• Deposit: A larger deposit, generally 20% of the property's value, improves your chances of approval and may help you avoid Lenders Mortgage Insurance (LMI).
• Loan Type and Term: Fixed and variable rate loans are available, with terms typically ranging from 25 to 30 years.

Esteb and Co, with its access to over 83 lenders, can help you find the right mortgage product that suits your financial situation, even if you have student loan debt.

Steps to Getting a Mortgage with Student Loan Debt

Here's a step-by-step guide to help you secure a mortgage while managing student loan debt:

1. Assess Your Financial Situation: Start by evaluating your income, expenses, and existing debts, including your student loan. This will give you a clear picture of your financial health.
2. Improve Your Credit Score: Pay your bills on time and reduce your credit card balances. A higher credit score increases your chances of mortgage approval.
3. Save for a Deposit: Aim for at least a 20% deposit to improve your application and potentially avoid LMI.
4. Calculate Your Borrowing Capacity: Use online calculators or consult a mortgage broker like Esteb and Co to determine how much you can borrow.
5. Get Pre-Approval: This will give you a clear idea of how much you can afford and make you a more attractive buyer.
6. Consult a Mortgage Broker: Leverage the expertise of Esteb and Co to explore options from a wide range of lenders.
7. Choose the Right Loan: Consider the loan type, interest rate, and term that best fits your financial situation.

Tips and Considerations

Here are some expert tips to consider when applying for a mortgage with student loan debt:

• Budget Wisely: Ensure you have a realistic budget that accounts for mortgage repayments and other financial commitments.
• Consider Co-Ownership: If eligible, co-owning with a partner or family member can increase your borrowing capacity.
• Explore Government Grants: Check if you qualify for any first-home buyer grants or incentives that can ease the financial burden.
• Stay Informed: Keep up with market trends and interest rates to make informed decisions.
• Plan for the Future: Consider potential changes in your financial situation, such as career progression or family planning.

Frequently Asked Questions

• Can I get a mortgage if I have a HECS-HELP debt?
  Yes, lenders generally consider HECS-HELP debts differently, focusing on your overall financial capacity.
• How does my student loan affect my borrowing capacity?
  Your student loan repayments are factored into your debt-to-income ratio, which influences how much you can borrow.
• Will a larger deposit help if I have student loans?
  Yes, a larger deposit can strengthen your application and may help you avoid LMI.
• Is it better to pay off my student loan before applying for a mortgage?
  This depends on your financial situation. It's essential to assess whether paying off your loan or saving for a deposit is more beneficial for you.
• Can a mortgage broker help me find a loan with student debt?
  Absolutely. Esteb and Co can assist in finding suitable mortgage options through their panel of 83+ lenders.
• What credit score do I need to get a mortgage?
  While requirements vary, a credit score above 650 is generally favourable for mortgage applications.