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 theatre, 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. This is where you need to start worrying about your student debt.

If you chose 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 $55,874 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 starts at 4% and increases with your income topping out at 8% when you earn over $103,7664 annually.

Essentially, this decreases your net annual income, your serviceability and borrowing capacity.  HECS/HELP debt is indexed against inflation so it may be more beneficial to pay off higher interest debts such as credit cards, car loans or personal loans.

Phil Farrugia believes that mortgage brokers are more than capable of dealing with the impact of student debt on a loan application.

“By having the ability to compare several lenders at the one time, we are able to recommend a product suitable for the applicant’s individual needs,” says Phil.

“During the initial contact with the applicant, we will complete a fact find, enabling a comprehensive financial analysis to be conducted,” says Phil,  “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. Call Phil on 0467 444 707 today to find out more