Should You Pay Off Your HECS or HELP Debt Before Buying Property?

First Home Buyers

8 Oct

Deciding whether to pay off your HECS or HELP debt before buying property is a common question I hear from clients. There is no one-size-fits-all answer. The right move depends on how lenders treat HELP debt today, your salary and savings, the size of your debt, and your property timeline. Recent changes to how banks assess HELP debts mean the calculus has shifted for many buyers.

What HECS and HELP actually are and how they bite into borrowing capacity

HECS and HELP are income-contingent loans collected by the ATO, with repayments taken through the tax system and the balance indexed each year. That indexation and the repayment threshold influence how much you repay and when. Traditionally, lenders treated HELP balances like other liabilities which reduced assessed borrowing capacity. Recent regulatory and lender policy updates, however, have changed that picture for some borrowers.

How lenders are changing the rules

Big lenders and a number of broker lenders updated their assessment rules in 2024 and 2025. Some banks now exclude small HELP debts or only count repayments due over a longer horizon, while others apply lower buffers when HELP repayments are judged affordable within 12 months. Those shifts can materially increase how much you can borrow. It is important to check current lender policies because treatment still varies between banks.

The numbers matter: Opportunity cost vs guaranteed return

HECS is effectively a low-cost, index-linked debt rather than a commercial loan. If you have only a small HELP balance and low compulsory repayments, using spare cash to build a bigger deposit can often get you into the market sooner. Entering the property market earlier may capture capital growth that outweighs the benefit of clearing a relatively cheap indexed debt. Conversely, if your HELP repayments are large enough to significantly reduce borrowing power or your loan serviceability is marginal, paying down the debt could be sensible.

When paying it off makes sense

Your HELP balance is large and monthly repayments are materially reducing your borrowing capacity.
You plan to buy soon and lenders you want to use explicitly count HELP as a liability that lowers how much you can borrow.
You value the peace of mind of being debt free more than potential investment returns.

In these cases, reducing or clearing HELP can improve your chances of approval or simplify your cashflow.

When saving for a deposit is often better

Your HELP repayments are small relative to your income.
Lenders you can access are excluding or de-emphasising HELP in serviceability calculations.
Property prices are rising and delaying purchase to clear HELP could cost more in missed price growth than you would save in indexation and repayments.

If any of these apply, prioritising a deposit and maintaining an emergency buffer is usually the higher-return strategy.

Practical steps to decide

Get an up-to-date borrowing estimate that shows how different lenders treat your HELP debt.
Compare the cost of keeping HELP (indexation and repayments) with the potential returns or costs of delaying a purchase.
Consider where you sit on the repayment threshold and whether upcoming policy changes affect your compulsory repayments.
If your borrowing position is marginal, run scenarios: one where you pay down HELP and one where you save a larger deposit. Lenders and brokers can model both quickly.

Conclusion

There is no automatic rule that you must clear HECS or HELP before buying property. For many Australians, especially where HELP repayments are small or lenders are already relaxing their assessment of HELP, prioritising a bigger deposit and getting into the market sooner makes sense.

For others, particularly those whose HELP repayments materially erode borrowing power, paying down the debt can be the right move. The best approach is to run lender-specific borrowing scenarios and weigh the opportunity cost of delaying a purchase against the peace of mind and borrowing boost of reducing HELP.