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How to buy a house when you have a HECS or HELP debt

Paying off your education is no reason to put off buying property.

You can remember it now: sitting in a chair at the back of the lecture theater, chatting to your friends and ignoring the debt that each day at university was plunging you into.

But now you’re older and wiser, and reality has set in. You want to buy a property, but you’re unsure how your student HECS or HELP debt could impact your ability to take out a loan.

When you apply for a home loan, you’ll need to reveal information about your liabilities, poor credit ratings and any other debts you have. Student debt is treated the same as a personal loan or car loan. The real difference between a personal loan and HECS/HELP is you only start repaying the once you start earning over the minimum threshold.

You may also choose to defer any of your HECS/HELP payment, you don’t need to start paying it off until you’re earning an annual taxable income of $54,869 or more.

At this point your employer is required to hold a percentage of your taxable income and direct it towards your HECS/HELP loan. The percentage increases with your income but tops out at 8 per cent when you earn over $101,900 annually.

Essentially, this decreases your net annual income.

Student Debt that is paid out from your income will reduce your net income and therefore lower your borrowing capacity when it comes time to getting a mortgage. Having a student debt shouldn’t hold you back from getting a mortgage, as mortgage brokers are more than capable of dealing with the impact of student debt on a loan application.

What is important is that you disclose the student debt to your mortgage broker so they’re able to tailor lending options to your current situation. During the initial contact with the applicant, the broker will complete a broker fact find, enabling a comprehensive financial analysis to be conducted. From there, guidance can be given on paying down or consolidating debt in order to reduce outgoings and increase borrowing capacity.
If you’re getting ready to buy a property for investment or to live in, there’s no need to hold out because you’re still paying for your education.

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