Why your student loan can make it harder to get a home loan

When it comes to classifying debt as either ‘good’ or ‘bad’, borrowing to fund your education or buy a property are generally regarded as good debt, because both tend to deliver a return on investment.

However, you might not realise that taking on HECS-HELP debt can make it harder to qualify for a home loan and reduce your borrowing capacity.

That’s because, if hundreds of dollars per month are being diverted from your salary to repay your student debt, that means you have less money to devote to mortgage repayments.

So does that mean you should repay your HECS-HELP loan as soon as possible?

Maybe yes, maybe no. On the one hand, eliminating your student debt could make it easier to get a home loan. On the other hand, student debt is interest-free (although it does increase in line with inflation), so it might be better to repay other interest-incurring loans first.

Give me a call if you want to know the best approach for your situation or your child’s situation.

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