Can you get a mortgage with a HECS debt?

HECS debt does not prevent you from obtaining a mortgage, but it can impact how much you can borrow by reducing your available monthly income for mortgage repayments. By managing your HECS repayments efficiently, maintaining stable employment, and ensuring a strong financial standing, you can successfully secure a mortgage despite having a HECS debt.

Understanding the implications of having a Higher Education Contribution Scheme (HECS) debt is crucial when you’re considering buying a home. Many Australians worry that their educational debt may prevent them from obtaining a mortgage. This article will explore how HECS debt affects your mortgage application and provide practical advice to navigate this complex area.

Understanding HECS Debt

HECS debt is accumulated when you attend university or an eligible higher education institution in Australia and choose to defer your tuition fees through the HECS-HELP scheme. This debt is then indexed to inflation each year, which can cause it to increase, but it does not incur high-interest rates like other forms of personal debt.

Repayments for HECS debt begin once your income reaches a certain threshold, currently set at $51,550 per year (as of 2023-24). The repayment rate increases progressively with your income, capping at 10% for incomes over $151,200.

HECS Debt and Mortgage Eligibility

Mortgage lenders consider HECS debt as part of your overall financial commitments when assessing your borrowing capacity. However, unlike other debts, HECS is seen more leniently because it is an investment in your future earning potential and does not carry harsh penalties or high-interest rates.

Calculating Borrowing Power

When applying for a mortgage, lenders calculate your borrowing power by assessing your income, debts, and other financial commitments. HECS debt is factored into this assessment through your debt-to-income ratio. For instance, if your income is used to make HECS repayments, it reduces the amount available for mortgage repayments, potentially lowering the amount you can borrow.

Preparing to Apply for a Mortgage with HECS Debt

Before applying for a mortgage, check your credit score and work on enhancing it if needed. Ensure your employment is stable and your income is sufficient to cover your debts, including your HECS repayment and future mortgage repayments. Additionally, saving a larger deposit can also offset some of the impacts of your HECS debt on your borrowing capacity.

Application Process

The mortgage application process involves providing various documents, including proof of income, employment, and debts. For those with HECS debt, it’s essential to have your recent Notice of Assessment from the ATO, which shows your income and the amount of HECS debt repaid. When presenting your financial situation, clarity and honesty about your debts and income are crucial for a smooth application process.

Should You Pay Off Your HECS Debt?

While paying off your HECS debt means you can borrow more money, it also uses up a large chunk of money that could have been used for the deposit. This means that it may not be beneficial to pay off your HECS if you owe a substantial amount. Also, remember that HECS debt only follows indexation and doesn't get charged actual interest.

However, if you have a small HECS debt, it may make sense to pay off your debt. This is because when lenders calculate borrowing power, they look at how your HECS repayments affect your monthly income available to make mortgage payments. Even if your HECS debt is only small, the repayments reduce the amount you can pay on your home loan, and hence your borrowing capacity. It is best to speak to a financial advisor before making this decision.

Case Studies

Consider the example of Jane, a recent graduate with a HECS debt of $25,000, who successfully obtained a mortgage. By maintaining a stable job in her field of study, her income met the threshold for HECS repayments, which she managed efficiently while saving for a home deposit. Her lender considered her career trajectory and potential future income increases, facilitating approval for her mortgage.


While a HECS debt can affect your mortgage application, it doesn’t prohibit you from buying a home. With careful planning and a clear understanding of your finances, you can manage your HECS debt and secure a mortgage. Always consider seeking advice from financial advisors or mortgage brokers to explore the best strategies for your situation.


Will having a HECS debt prevent me from getting a mortgage?

Not necessarily. While it may affect how much you can borrow, having a HECS debt is not a barrier to obtaining a mortgage as long as you can manage your repayments and meet other lending criteria.

How do I improve my chances of getting a mortgage with a HECS debt?

Ensure stable employment, maintain a good credit score, save for a larger deposit, and keep other debts minimal.

Do lenders treat HECS debt differently from other debts?

Yes, lenders generally view HECS debt more favourably than other consumer debts because it represents an investment in your education and future earning capacity.

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