When HECS Impacts your Loan Application

Ergh. Every year indexation gives you a swift reminder that you have a HECS debt, not to mention that pesky debit each week from your payslip. But did you know that HECS impacts the amount you can borrow? It makes sense, right. You have an income, some payments come out each week for HECS which reduces the amount you get in your bank account. So of course lenders are going to see it the same way. A liability. But the issue is, many clients are on their way to clearing their HECS debt in the next few years… so why do lenders and banks say you cannot afford your Home Loan over 30, when they know all to well that you’re going to be HECS free in 5 years?

Most lenders treat HECS like any other liability. They add your compulsory repayment to your monthly commitments, run it through their calculator, and your borrowing capacity drops. For someone with a large HECS balance and a strong income, this can shave tens of thousands and sometimes hundreds of thousands off what they can borrow, even though the debt has no interest and no fixed term pressure.

Here is what most people are not told. Not every lender calculates HECS the same way. Some use your actual repayment rate based on income. Others use outdated assumptions that overstate the impact. A handful will look past the debt entirely if you can show it will be cleared within twelve months, whether through a lump sum payment or an employer arrangement.

This is where the right lender match matters more than the loan rate. Two applicants with identical income and identical HECS balances can walk away with very different borrowing outcomes, purely based on which lender assessed the file. This can be the difference in buying the house you want and the house you just have to buy because of your budget.

The fall out, you’ll probably end up selling it soon, paying stamp duty again and paying agent fees because you can upgrade later on. What if we told you, we might be able to help you get that home now?

If HECS has been holding back your borrowing power, or you assumed it would, there is often more room to move than you think. A conversation with a broker who understands how each lender treats this debt can change the numbers entirely. We support not only First Home Buyers but all types of loans that have HECS attached, such a Investment Properties, Upsizers and Downsizers and Refinancers.