Should I Pay Off My HECS Debt Before Buying a House?
Should I Pay Off My HECS Debt Before Buying a Home?
You’ve saved a deposit. You’re earning pretty good money. You’re finally starting to think seriously about buying a home.
There’s just one thing lurking in the background:
Your HECS or HELP debt.
So should you use some of your savings to just pay it off before applying for a home loan?
Maybe.
But I wouldn’t automatically transfer a huge chunk of your house deposit to the ATO without first understanding what difference it could actually make.
HECS/HELP debt can affect how much you can borrow, but whether paying it off makes sense depends on your balance, income, savings and how different lenders assess your position.
Here’s what you need to know.
Does HECS debt affect your borrowing capacity?
Yes, it can.
When a lender assesses how much you can borrow, they’re looking at the income you have available to meet your home loan repayments and other expenses.
If you’re required to make compulsory HECS/HELP repayments, those repayments reduce the income you have available.
That’s why your HECS/HELP debt can affect your borrowing capacity even though it works differently from something like a credit card or car loan.
The Australian Prudential Regulation Authority (APRA) explains that HELP repayments have traditionally been considered when banks assess someone’s ability to repay a mortgage.
However, HECS/HELP debt is unusual because your compulsory repayments are based on your income rather than simply the size of the debt.
The HELP repayment system has changed
The way compulsory HELP repayments are calculated changed from the 2025–26 financial year.
Under the new system, compulsory repayments begin when your repayment income exceeds $67,000, with repayments calculated only on the income above the threshold.
The threshold and repayment amounts are indexed over time, so it’s always worth checking the latest information directly with the ATO.
Check the current HECS/HELP repayment information on the ATO website or by clicking here.
These changes can affect how much is coming out of your income for HECS/HELP repayments, which may also be relevant when you’re preparing to apply for a home loan.
Lenders now have more flexibility with HELP debt
This is particularly important if you’re close to paying your HECS/HELP debt off.
APRA changed its guidance in 2025 to give banks more flexibility when assessing borrowers whose HELP debt is expected to be repaid in the near term
For example, APRA has said that it may be reasonable for a lender to exclude HELP repayments from its assessment in some circumstances where the debt is expected to be fully repaid within around 12 months.
That doesn’t mean every lender will automatically ignore your HECS/HELP debt because the balance is getting low.
Lenders still have their own policies and need to decide whether your circumstances meet their requirements.
But if your HECS/HELP balance is relatively small, it’s worth investigating rather than assuming every lender will assess it in exactly the same way.
Should you pay off your HECS/HELP before applying for a home loan?
This is where I wouldn’t use a blanket rule.
Imagine you have:
$60,000 saved for your property purchase and $8,000 remaining on your HELP debt.
You could potentially pay off the $8,000.
Your HECS/HELP debt disappears, which could improve your borrowing position.
But now you have $52,000 available for your property purchase instead of $60,000.
Which position is better?
It depends.
Now imagine you have $60,000 saved but your HECS/HELP balance is $45,000.
Using most of your savings to clear the debt could leave you without enough money for your deposit and purchasing costs.
That’s why the question isn’t simply:
“Is HECS/HELP bad for my borrowing capacity?”
The better question is:
“Would paying off my HECS/HELP debt put me in a better overall position to buy?”
Does the size of your HECS/HELP debt matter?
Yes, but perhaps not in the way you might expect.
A large HECS/HELP balance doesn’t necessarily work exactly like having the same amount owing on a personal loan.
HECS/HELP repayments are income-based.
However, the remaining balance can become particularly relevant when you’re getting close to paying the debt off.
If your HECS/HELP debt is expected to disappear relatively soon, some lenders may be able to take that into account when assessing your application.
This is one area where comparing lenders can become important because their policies and approach can differ.
Could paying off HECS/HELP increase how much you can borrow?
Potentially.
Removing a compulsory HECS/HELP repayment can leave more of your income available when a lender assesses whether you can afford a mortgage.
That could improve your borrowing capacity.
But the actual difference depends on your individual circumstances.
Your income, expenses, credit cards, other debts, dependants and the lender you’re applying with all contribute to your borrowing position.
So I wouldn’t pay off HECS/HELP debts purely because someone told you it would give you an extra $100,000 of borrowing capacity.
Speak to a Broker (me) to find out what the actual difference could be for you first.
What if paying off HECS/HELP reduces my deposit?
This is the trade-off buyers sometimes miss.
Borrowing capacity is only one part of buying a property.
You also need enough money to complete the purchase.
Depending on your situation, that could include:
Your deposit
Stamp duty if applicable
Conveyancing or legal costs
Inspections
Loan-related costs
Money you’d like to keep aside after settlement
Using $20,000 of your savings to clear HELP might improve one side of your position while making the deposit side harder.
That’s why I like to look at both scenarios.
Scenario one: Keep the HELP debt and use the cash towards the property.
Scenario two: Pay off the HELP debt and see how your borrowing capacity and available deposit change.
Once you can see the actual numbers, the decision becomes much easier to understand.
Should you make a voluntary HECS/HELP repayment just before applying?
Don’t rush into it.
Voluntary HECS/HELP repayments can generally be made at any time, but I’d understand the impact on your home loan position before making a large payment.
Once you’ve used your savings to repay the debt, you can’t simply change your mind and use that same money for your property deposit.
If paying the debt off creates a meaningful improvement in your borrowing position, it may be worth considering.
If it makes very little difference but wipes out a large chunk of your deposit, that’s useful to know too.
Find out what your HECS/HELP debt is actually costing your borrowing capacity
Having a HECS/HELP debt doesn’t automatically mean you can’t buy a home.
And paying it off isn’t automatically the smartest thing to do.
What matters is how it affects your numbers.
If you’re planning to buy and wondering whether you should use your savings to clear your HECS debt first, get both scenarios calculated before making the payment.
You may find that paying it off improves your borrowing position.
You may find that keeping the cash for your deposit makes more sense.
Or, if you’re close to paying the debt off anyway, there may be lenders that can assess your situation differently.
If you’re thinking about buying your first home or investment and want to know how your HECS/HELP debt is affecting your borrowing capacity, I can help you compare the numbers before you decide what to do next.
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Eshanee Collins is a mortgage broker and founder of April Six , helping first-home buyers and property investors understand their finance options and make confident property decisions.