For many young Australians, buying a home is a dream, but student loans (HECS-HELP) can often feel like a roadblock. Understanding how HECS-HELP impacts your home loan application is crucial for planning and achieving your homeownership goals.

Case Study: Sarah’s Home Loan Journey

Sarah, a 32-year-old marketing professional, is ready to buy her first home but has a HECS-HELP debt from her university days. She’s concerned about how this debt might affect her ability to get a mortgage.

What is HECS-HELP Debt?

HECS-HELP is a government-backed loan that covers university tuition fees. Repayments are automatically deducted from your income once you earn above a certain threshold. While there’s no interest, the loan amount is indexed annually for inflation.

The Impact on Home Loan Applications

Sarah’s mortgage broker explains that HECS-HELP debt can impact her borrowing capacity. Lenders consider your total debt obligations (including HECS-HELP) when assessing your debt-to-income ratio. This could potentially limit the loan amount you qualify for.

Strategies for Success

Sarah’s mortgage broker outlines a few strategies to improve her chances of getting a mortgage:

1. Pay Down HECS-HELP: If possible, paying off your HECS-HELP debt can significantly boost your borrowing power.
2. Reduce Other Debts: Clearing or reducing credit card balances and other loans can improve your debt-to-income ratio.
3. Consider Government Grants: Explore government assistance programs like the First Home Owner Grant or the First Home Loan Deposit Scheme, which can help with the upfront costs.
4. Increase Your Deposit: Saving more for a larger deposit can lower the loan amount you need, making you a more attractive borrower.
5. Choose the Right Lender: Some lenders are more lenient towards HECS-HELP debt. Shop around and find a lender who understands your situation.

Sarah’s Outcome

By managing her finances wisely, seeking professional advice, and implementing these strategies, Sarah was able to secure a home loan with a competitive interest rate. She achieved her dream of buying a home despite her student loan debt.

Key Takeaways

• HECS-HELP debt can impact your home loan application, but it doesn’t have to be a deal-breaker.
• Understanding your financial situation and exploring various strategies can help you achieve your homeownership goals.
• Seek professional advice from a mortgage broker or financial planner to help you navigate the process.

Remember: Home ownership is a significant financial commitment. A financial planner is the right resource to help you understand the factors involved and explore your options. With careful planning and guidance, you can achieve your dream of buying a home despite having a student loan. Contact us for an appointment today.