If your HECS-HELP debt has been keeping you from buying a home, 2025 brought some of the biggest changes in years to how banks assess mortgage applications.
For the first time, banks may stop counting HECS repayments in borrowing power calculations, meaning some buyers could borrow up to $90K more.
This shift is part of the government's push to help young Australians enter the property market sooner. But there are some important details you need to know.
What's changing?
Previously, banks treated HECS debt like a personal loan, reducing how much you could borrow.
Now, banks can ignore HECS repayments in serviceability tests if the debt is close to being paid off.
Impact: First-home buyers could qualify for bigger loans or finally get approved.
But not everyone will benefit. So, let's break down exactly what this means for you.
How will HECS debt impact borrowing power from 2025 onwards?
Until now, banks have treated HECS debt like a credit card or personal loan. Even though HECS doesn't have interest and only kicks in at a certain income level, lenders still included repayments in mortgage affordability calculations.
That meant many borrowers saw their borrowing power drop by tens of thousands of dollars, even if they had strong incomes and good savings.
Example:
If you earned $80,000 annually, your HECS repayment was about $267 monthly. That could reduce your mortgage borrowing power by $50K or more under the old rules.
From 2025, banks can ignore HECS repayments if you're close to paying them off, which will make a huge difference for buyers who were previously rejected.
Broker Insight from previous FHBs: "I’ve worked with many first home buyers that had no idea their HECS debt affected their borrowing capacity. In many cases it has meant they either can’t buy yet, or the 'bank of mum and dad' have had to step in to help pay off their HECS debt so they could still get into the property market." - Tracey Hammond, Aussie Mosman
How much more can you borrow? Real-world scenarios
The exact boost to your borrowing power depends on your income, HECS balance, and lender. But here's a real-world example of what's changing:
Borrower Scenario | Old Rules (HECS counted) | New 2025 Rules (HECS ignored) |
|---|---|---|
$150K income, $20K HECS | Borrowing power reduced by $90K-$130K | If HECS is nearly paid off, borrowing power increases significantly. |
| Borrowing power reduced by ~$50K | Low HECS balance or nearly repaid, banks ignore it, resulting in higher loan approval. |
For many buyers, this could mean the difference between renting and owning.
Broker Insight on the impact this change could have: "It really depends on the borrower's income and what the percentage of their income is paid towards their HECS debt each year. Someone earning under $54,435 doesn't need to pay any HECS repayments, whereas someone earning over $159,664 has to pay a minimum of 10% of their income towards their HECS debt, which decreases their borrowing capacity significantly. In most cases, I think this change will have a significant impact on borrowers as it will unlock borrowing power." - Tracey Hammond, Aussie Mosman.
Who benefits most from the HECS changes?
Buyers who stand to gain the most:
Young professionals earning $100K+ (e.g., doctors, engineers, IT professionals) who still have HECS but strong income potential.
First-home buyers earning $70K - $90K who previously missed out due to HECS repayments limiting their borrowing power.
Buyers close to paying off HECS (within 1-2 years), as lenders may completely ignore HECS repayments.
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Who might not benefit?
Banks may still factor this in for buyers with large HECS debts and lower incomes.
Anyone more than 5 years away from clearing HECS since repayments will still be counted.
Broker Insight on the impact HECS has on deposits: "One of the biggest challenges I come across for every Australian in today’s economy is the deposit. Where HECS debt is significantly impacting borrowing power, the majority of those customers have to dip into their savings/deposit to pay it out, which then sets them back in many different aspects of the home buying journey - and placing them at a significant disadvantage." - Alya Manji, Aussie Hurstville
Should you pay off HECS before applying for a mortgage?
The short answer? It depends.
Pay it off before applying where:
Your HECS balance is under $5K, and you can clear it within a year.
it will significantly increase your borrowing power.
Don't rush to pay it off if:
You'd have to use your deposit savings; saving for a home is more important.
Your HECS debt is still large and won't be cleared soon.
Pro tip: HECS is interest-free, so keeping your savings for a home deposit is often the smarter move.
What should you do next to maximise your borrowing power?
With these new rules kicking in, reviewing your home loan options is the time. Here's what to do next:
1. Check if your HECS debt qualifies for exclusion
Log in to MyGov and check your HECS balance.
If your debt is small or nearly paid off, lenders may ignore it in loan calculations.
2. Get pre-approved with a HECS-friendly lender
Not all banks will apply these rules similarly; some will still factor HECS in.
3. Talk to an Aussie Broker
Aussie brokers can match you with lenders who are applying the new rules in your favour.
Lender Matching: Look for banks that won't count HECS repayments against you.
Loan Structuring: Optimise your mortgage application for higher borrowing power.
First-Home Buyer Support: Access grants, incentives, and expert home loan advice.
Broker Insight from a customer experience prior to the changes: "I recently had lovely couple starting their first home journey where both had graduated and started their careers as medical professionals. Both had average to high income as well as HECS debt. This had a significant impact on their borrowing power, setting back their plan to enter the market by about 9 - 12 months, which was devastating for them."
"This couple - and many others I've spoken to - aren’t aware of the impact of HECS debt when trying to obtain a home loan. For them, it meant going back to the drawing board and reassessing their plan to try to own their first home!" - Alya Manji, Aussie Hurstville