Many first home buyers have a HECS-HELP debt from university or TAFE. It doesn't charge interest like a normal loan, but it can still affect how much you can borrow.
Why HELP debt affects borrowing power
HELP debts are repaid through the tax system once your income passes the repayment threshold. That compulsory repayment reduces your take-home pay, and lenders count it as a commitment.
The effect depends on your income. A person earning $90,000 has a higher compulsory repayment than someone earning $70,000.
Recent changes
Several changes in 2025 affected HELP debts:
- A 20% reduction to outstanding HELP debts was legislated, applied to balances as at 1 June 2025
- A higher repayment threshold and a new marginal repayment system from 2025–26, meaning repayments only apply to income above the threshold, which lowers repayments for many people
Some lenders have also changed their policies, for example by disregarding HELP repayments if the debt is small or close to being paid off. Policies vary, so ask.
Should you pay it off before applying?
It depends.
Reasons to consider paying it off: - The debt is small and paying it would remove the repayment from your assessment - It could lift your borrowing power enough to matter
Reasons not to: - HELP debts are only indexed, not charged interest, so they're cheap debt - Using your deposit to repay HELP might leave you short for the purchase - Your lender may already disregard it
Run the numbers first. Sometimes paying off $8,000 of HELP debt adds more borrowing power than putting that $8,000 towards your deposit. Often it doesn't.
How much does it affect borrowing?
As a rough guide, if your compulsory HELP repayment is $200 a month, it could reduce borrowing power by around $20,000 to $25,000 at current assessment rates. Higher incomes have bigger repayments and a bigger effect.
Frequently asked questions
Do lenders count HELP debt as a loan?
They count the repayment, not the balance, in most cases. Some include the balance in debt-to-income calculations.
Will my HELP debt stop me using the 5% Deposit Scheme?
No. It only affects borrowing power.
Can I consolidate HELP into my mortgage?
Generally not worthwhile, because HELP doesn't charge interest the way a home loan does.
Not sure whether to pay off your HELP debt first? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654. We'll compare both options with real lender calculations.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
