Does HECS-HELP debt reduce my borrowing power?

Yes. Lenders include your compulsory HECS repayment as a liability in their serviceability assessment. This reduces the income available for loan repayments and can lower your maximum borrowing amount by tens of thousands of dollars.

By how much does HECS reduce borrowing power approximately?

As a rough guide, every $10,000 of HECS debt can reduce borrowing power by $5,000 to $15,000 depending on the lender, your income level, and the applicable repayment rate. The higher your income, the higher the compulsory repayment percentage, and the bigger the impact.

Should I pay off HECS before applying for a home loan?

It depends on the trade-off. If paying off HECS would deplete your deposit savings, it may not help — a smaller deposit means more LMI costs. But if you have surplus savings beyond the deposit, reducing HECS can meaningfully increase borrowing capacity.

HECS and Buying a Home Australia | Impact on Borrowing Power

By AusTaxTools Editorial Team · March 17, 2026

Short answer

HECS-HELP debt directly reduces your home loan borrowing power. Lenders deduct your compulsory repayment from your income during serviceability calculations, which means less capacity for mortgage repayments. The impact scales with your income — higher earners face a bigger percentage deduction. You cannot hide HECS from lenders; it shows on your ATO records and credit reports. But there are strategies to manage the impact.

How lenders assess HECS

Lenders take your gross income, apply the HECS repayment percentage for your income bracket, and subtract that amount before calculating how much mortgage you can service. They also apply a buffer rate (usually 3% above the loan rate), which compounds the effect.

The buffer rate multiplier

APRA requires lenders to assess your ability to repay at a rate 3% above the actual loan rate. Combined with the HECS deduction from income, this double effect can reduce borrowing power by $30,000 to $80,000 on a typical salary, depending on the HECS balance and income level.

Strategies to manage impact

Consider making voluntary repayments to reduce the balance before applying — but only if it does not shrink your deposit. Salary sacrificing into super can reduce repayment income below a threshold bracket. Some lenders are more generous than others in how they assess HECS, so compare.

Common mistakes

Not disclosing HECS debt on a home loan application — lenders verify it through ATO records, and non-disclosure can lead to an application being declined.
Draining the deposit fund to pay off HECS — the borrowing power gain may be smaller than the cost of a reduced deposit (LMI, higher LVR).
Assuming all lenders treat HECS the same — assessment methods vary, and some lenders are materially more favourable for applicants with student debt.
Ignoring the threshold strategy — if your income is just above a HECS bracket boundary, a small salary sacrifice or deduction can lower your repayment rate and improve borrowing power.

HECS repayment calculator

See your compulsory repayment amount and how long until your HECS is paid off.

Borrowing power calculator

Check how much you can borrow with your current income and HECS balance.

Know your number

HECS reduces borrowing power — find out by how much before you start looking.

Enter your income, HECS balance, and expenses to see a realistic borrowing estimate.

Check borrowing power

Related guides

Voluntary Repayments Strategy

When voluntary HECS repayments make financial sense and when your money is better used elsewhere.

HECS/HELP Explained

Income thresholds, CPI indexation, and how HECS affects borrowing power.

Frequently Asked Questions

Does HECS-HELP debt reduce my borrowing power?: Yes. Lenders include your compulsory HECS repayment as a liability in their serviceability assessment. This reduces the income available for loan repayments and can lower your maximum borrowing amount by tens of thousands of dollars.
By how much does HECS reduce borrowing power approximately?: As a rough guide, every $10,000 of HECS debt can reduce borrowing power by $5,000 to $15,000 depending on the lender, your income level, and the applicable repayment rate. The higher your income, the higher the compulsory repayment percentage, and the bigger the impact.
Should I pay off HECS before applying for a home loan?: It depends on the trade-off. If paying off HECS would deplete your deposit savings, it may not help — a smaller deposit means more LMI costs. But if you have surplus savings beyond the deposit, reducing HECS can meaningfully increase borrowing capacity.