Tips for Purchasing a House with a HECS/HELP Debt

Your student debts do not have to hinder your property purchase plans. Learn how to manage your HECS or HELP debt wisely to make the most of your borrowing capacity and purchase your dream home.

If you have a HECS or HELP debt and are planning to buy a property, you may be wondering how this debt will impact your ability to take out a loan. When applying for a home loan, you will need to disclose information about your liabilities, credit history, and any other debts you may have. Therefore, it is essential to consider the impact of your student debt on your borrowing capacity.

If you have deferred your HECS/HELP payment, you will not be required to start paying it off until you earn an annual taxable income of $48,361 (2022-2023) or more. As your income increases, your employer will be required to hold a percentage of your taxable income to direct it towards your HECS/HELP loan. This percentage increases with your income and can reach up to 10% when you earn over $141,848 annually. Consequently, this can decrease your net annual income. These thresholds and percentages can change every year so make sure you review the ATO website.

However, mortgage brokers can help you manage the impact of your student debt on your loan application. By comparing several lenders simultaneously, a broker can recommend a product that is suitable for your specific needs, financial situation, and borrowing capacity. During the initial contact, the broker will complete a broker fact-find, enabling them to conduct a comprehensive financial analysis. It is important that you mention your student debt from the beginning. From there, the broker can offer guidance on paying down or consolidating debt to reduce outgoings and increase your borrowing capacity. Also, lenders will assess your current liabilities differently so it pays checking all options.

In summary, having a HECS or HELP debt does not have to hinder your property purchase plans. By working with a mortgage broker, you can manage your student debt wisely and purchase your dream home. Don't put your property purchase plans on hold – contact a mortgage broker today!