How does HECS debt affect borrowing capacity in Australia?
Since 30 September 2025, HECS/HELP balances are excluded from lenders' debt-to-income (DTI) calculations under APRA direction — your HECS balance no longer counts against the 6× income cap. However, HECS still reduces your borrowing capacity through a different mechanism: the ATO automatically withholds compulsory repayments from your salary above $54,435, reducing your net take-home pay and therefore the monthly surplus available to service a mortgage.
How it affects your borrowing
The impact depends entirely on your income. At $80,000, HECS costs about $2,800/year in withholding (~$230/month). At $120,000, it's about $7,800/year (~$650/month). That monthly reduction flows directly into lower borrowing capacity — roughly $28,000–$78,000 depending on income.
Worked example
Key factors
- HECS/HELP is excluded from DTI since 30 September 2025 — your HECS balance no longer reduces the 6× cap.
- HECS still affects serviceability (Ceiling 3) because compulsory repayments reduce net income.
- The repayment rate applies to total income, not just the amount above the threshold — at $100k, 5.5% of the full $100k is withheld.
- Paying HECS off early to increase borrowing capacity is rarely worth it — the cash is usually better used as deposit.
See how this affects your specific situation
Calculate your borrowing capacity with HECSFrequently asked questions
Should I pay off my HECS before applying for a mortgage?
Rarely. Since HECS is excluded from DTI, paying it off doesn't increase your 6× income cap. It only removes the compulsory withholding from your take-home pay. For most borrowers the borrowing capacity gain is much smaller than the cash used — which would serve better as deposit. Run the numbers in the calculator both ways before deciding.
What if my partner also has HECS?
Both borrowers' HECS repayments are deducted from their respective take-home pay in the serviceability calculation. If both partners earn $100,000 with HECS, the combined monthly reduction is around $916, reducing joint borrowing capacity by approximately $110,000.
Does HECS affect stamp duty or my deposit?
No. HECS does not affect stamp duty. For the deposit ceiling (Ceiling 1), HECS is irrelevant — only your savings, stamp duty, and LMI matter.
How do I enter HECS in the GetReal calculator?
The deposit calculator asks about HECS debt in the Ceiling 2 (Debt) section. If you enter your actual take-home pay (already net of HECS withholding), GetReal will not double-count it. HECS withholding is only estimated if you declare a HECS debt and the tool estimates your net income.
This page is part of GetReal's methodology documentation. Figures are updated when underlying data in our Supabase database changes. This is not financial advice.