Great News for HECS Holders: Your Borrowing Power Just Got a Boost

Major policy changes are set to significantly improve home loan prospects for Australian HECS holders

If you're one of the millions of Australians carrying a Higher Education Contribution Scheme (HECS) debt, we have some excellent news that could substantially improve your home buying prospects. Recent government policy changes and updated lender assessments are working together to increase the maximum borrowing capacity for HECS debt holders.

Have a HECS debt outstanding? Borrowing just got easier!

Two Key Changes Working in Your Favour

1. Government HECS Debt Reduction

The Australian Senate has passed a significant policy change that will see 20% of outstanding HECS debts wiped for eligible borrowers, backdated to July 1, 2025. This substantial reduction means:

• Your total debt load decreases immediately

• Lower overall debt-to-income ratios when applying for home loans

• Reduced ongoing repayment obligations that previously impacted borrowing calculations

• More disposable income available for mortgage servicing

2. Updated Lender Assessment Policies

Some lenders have also revised their assessment criteria regarding HECS repayments. Under the new policies:

• HECS debts at $20,000 or less can be excluded from borrowing calculations

• This recognises that short-term HECS obligations shouldn't impact long-term mortgage capacity

• Lenders now focus on your longer-term financial position rather than temporary debt servicing

What This Means for Your Home Loan Application

These combined changes can result in a significant increase in your maximum borrowing capacity. Here's how:

Improved Debt-to-Income Ratio: With 20% of your HECS debt eliminated, your overall debt burden is substantially reduced, making you a more attractive borrower to lenders.

Enhanced Serviceability: The impact to your borrowing power is dependant on income, with some estimates below to act as a guide:

Annual income	$75,000	$100,000	$125,000	$150,000
Increase in borrowing power	$25,000	$59,000	$101,000	$146,000

Taking Action: Next Steps

If you currently have a HECS debt, now is an excellent time to reassess your home buying position. We recommend:

1. Review Your HECS Statement: Check your current balance and estimated repayment timeline - this can be done via MyGov

2. Calculate Your New Position: Determine how the 20% reduction and new lender policies affect your borrowing capacity

3. Speak with Our Team: Let us run a comprehensive assessment of your improved borrowing power

4. Pre-approval Strategy: Consider obtaining pre-approval to secure your enhanced borrowing capacity

Don't Wait – Market Conditions Are Favourable

With these policy changes creating more borrowing power for HECS holders, combined with current market conditions, this could be an ideal time to enter or re-enter the property market.