Two nurses earn $85,000 each. One has no HECS balance. The other still owes $40,000. Notably, they walk into the same bank and get two different loan offers. Does HECS debt affect your home loan borrowing power? Yes, and for most healthcare workers it costs more than they expect. It costs less, though, than most online forums suggest. So this piece breaks down the real mechanism, the real numbers, and what changed in 2025 that most brokers have not caught up on yet.
Direct answer: HECS-HELP debt reduces your home loan borrowing power. Lenders treat your compulsory annual repayment as a committed expense, not extra income you can put toward a mortgage. On a $70,000 income, this typically shaves $20,000 to $50,000 off your maximum loan amount. Some lenders now ignore HECS entirely if you are close to paying it off.
How HECS debt actually reduces your borrowing power
Lenders do not see your HECS balance directly. Instead, they see your compulsory annual repayment, a figure the Australian Taxation Office calculates from your income. That repayment gets treated as money already spoken for. It cannot go toward mortgage repayments. So does HECS debt affect your home loan borrowing power through this one mechanism alone? Largely, yes.
Here is the mechanic in plain terms. Say you earn $90,000 and owe roughly $3,072 a year in compulsory HECS repayments. Your lender subtracts that figure from your usable income before running its serviceability test. Consequently, less income is available to cover loan repayments. As a result, the maximum loan the bank will approve drops.
The size of the drop depends on the lender’s serviceability buffer. Most Australian banks set this buffer around 3% above the actual interest rate, per APRA’s guidelines. That buffer stacks on top of your reduced income. Because of this, a modest HECS repayment can wipe out $20,000 to $50,000 of borrowing capacity. For someone with a larger balance and a higher income, the effect can reach $80,000 or more.
What your HECS balance actually costs you in borrowing power
The 2025–26 income year introduced a marginal repayment system. As a result, HECS now costs less than it once did at the same income. Still, the reduction in borrowing power scales with both your income and your HECS balance. The table below shows the pattern for common healthcare income levels, using nurse and doctor examples for home loans for nurses and home loans for doctors.
| Profession example | Income | Approx. compulsory HECS repayment (2026–27) | Estimated borrowing power reduction |
|---|---|---|---|
| Registered nurse | $85,000 | ~$2,321/year | $25,000 to $35,000 |
| Nurse practitioner | $110,000 | ~$6,928/year | $45,000 to $65,000 |
| Medical registrar | $130,000 | ~$10,277/year | $60,000 to $85,000 |
| Early-career GP | $160,000 | ~$16,439/year | $90,000 to $120,000 |
These figures assume a single HECS debt and no other loans. Additionally, every lender models this slightly differently. So the same income and balance can produce a different outcome from bank to bank.
Why the marginal system changed the maths
Before July 2025, HECS repayments were a flat percentage of your entire income once you crossed the threshold. Now, the ATO calculates compulsory repayments only on income above $69,528 for 2026–27. The rate is 15c per dollar up to $129,717, then 17c per dollar to $186,050, then 10% above that. In practice, most healthcare workers now repay less than they did under the old system. This softens the borrowing power hit compared to a couple of years ago.
Why lenders are treating HECS differently in 2026
Two major banks moved first. Commonwealth Bank now disregards HECS repayments entirely if your debt will clear within 12 months. It also relaxes its serviceability buffer for borrowers on track to clear their balance within 5 years. National Australia Bank introduced a similar carve-out shortly after.
This shift did not happen in isolation. From 30 September 2025, APRA updated its reporting standard. Banks must now exclude HELP debt from the debt-to-income ratio they report to the regulator. That is a systemic reporting change, not a rule that automatically improves your individual application. However, it signals that the regulator no longer treats HECS as high-risk debt. That view has given individual lenders room to loosen their own policies.
The upshot: your HECS balance alone no longer determines your outcome. What matters more is how quickly you are paying it off, relative to the size of your remaining balance.
Should you pay off your HECS before applying for a home loan?
Usually, no. HECS carries no commercial interest rate. It is only indexed each year at the lower of CPI or wage growth, which sat at 2.8% in 2026. That rate sits far below what your cash could earn as part of your deposit. It also sits well below most personal loan or credit card rates.
Clearing HECS early only makes sense in a narrow case. Your balance needs to be small enough to pay off within a year or two. Doing so also should not eat into your deposit. If clearing $8,000 gets your HECS to zero and opens up a lender’s disregard policy, that trade can be worth it. If it means arriving at settlement with a smaller deposit, it usually is not.
What to do before your next home loan application
A few moves can genuinely change your outcome, beyond simply hoping a bank ignores your HECS balance.
- First, ask each lender how they treat HECS. Policies differ sharply between banks. A broker who tracks this across lenders can match you to the one that treats your specific balance most favourably.
- Next, check your remaining balance against the 12-month and 5-year thresholds some lenders now use. Being just inside one of these windows can materially change your result.
- Also, avoid voluntary HECS repayments right before applying, unless clearing the debt entirely triggers a disregard policy. Otherwise, that cash is usually better placed toward your deposit.
- Finally, get a realistic borrowing power figure before you start looking. This way, you are house-hunting in your actual price range, not a bank’s advertised maximum.
Want a clearer starting point? Use our borrowing power calculator before you start inspecting properties.
Your next step as a healthcare professional with HECS
HECS debt will factor into your application either way. That said, exactly how much it costs you depends on your balance, your income, and which lender you apply with. It is not a single rule you can Google. Because policies keep shifting bank to bank, the gap between a generic online calculator and a proper assessment can run into tens of thousands of dollars. If you want a real number instead of an estimate, that is a fifteen-minute conversation. Book a free Discovery Call and find out what your file actually qualifies for.
Information current as of July 2026. Lending criteria vary by lender and are subject to change. This is general information, not personal financial advice.
