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How the 2026 HECS Changes Could Boost Your Borrowing Capacity by Up to $90,000

If you’ve been putting off buying your first home because your HECS-HELP debt keeps getting in the way of loan approval, 2026 has brought some genuinely good news. A combination of a raised repayment threshold and a shift in how major lenders assess student debt could unlock tens of thousands of dollars in additional borrowing power — potentially enough to change what’s possible for you in the property market.

What Changed With HECS in 2026?

Two separate but related developments have improved the situation for borrowers with student debt.

The Repayment Threshold Is Now $67,000

The mandatory HECS-HELP repayment threshold has been lifted to $67,000, and repayments are now calculated on a marginal rate basis — meaning you only pay the applicable percentage on income above that threshold, not your total income. For borrowers earning close to the threshold, this reduces actual repayment obligations materially. Lenders use your actual repayment obligation to assess serviceability, so a lower mandatory repayment means more of your income is available to service a mortgage.

CBA and NAB Now Exclude Near-Repaid HECS Balances

Commonwealth Bank and NAB have updated their credit policies to exclude HECS-HELP debt from serviceability assessments when the balance is small enough to be considered close to fully repaid. Previously, even a modest HECS balance counted against your borrowing capacity the same way a $50,000 balance would. Under the updated approach, if your HECS is nearly gone, it’s treated accordingly — as a short-term liability about to disappear.

How Much Could This Unlock?

The practical impact varies, but for many first home buyers the combined effect of these changes could unlock $30,000 to $90,000 or more in additional borrowing capacity. Here’s a simplified example:

Old assessment: Borrower earning $95,000 with $18,000 HECS remaining. Lender models ~$1,900/year in repayments, reducing borrowing capacity by $30,000–$40,000.
New assessment (CBA/NAB): Near-repaid HECS excluded. Combined with the marginal threshold change, the recovered borrowing power can reach $50,000–$90,000.

This is why applying with the right lender matters enormously. The difference between banks on HECS treatment can be tens of thousands of dollars.

Why Different Lenders Treat HECS So Differently

Lenders set their own credit policies within APRA’s framework, and on HECS they broadly fall into three groups:

Progressive lenders (CBA, NAB): Exclude near-repaid HECS balances from serviceability calculations
Standard lenders: Include HECS repayments but now apply the updated marginal rate calculation — an improvement, but less significant
Conservative lenders: Still assess HECS at a higher modelled rate, or treat the full balance as a liability regardless of how close you are to clearing it

If you’re buying your first property and you have HECS debt, applying to the wrong lender could mean tens of thousands of dollars of unnecessarily reduced borrowing capacity. This is one of the clearest examples of why using a broker — who can compare your profile across lenders — changes outcomes.

Who Benefits Most?

First home buyers with residual HECS who’ve been working for a few years
Borrowers earning $67,000–$100,000 (the marginal rate change has the greatest impact here)
Those with HECS balances under $30,000, most likely to qualify under the near-repaid exclusion

If you’re carrying a large HECS balance — $60,000 or more — the impact is more limited. The biggest gains are for those in the final stretch of repayment.

What to Bring to Your Broker Conversation

Understanding how much deposit you need and which loan type suits your situation matter alongside your HECS position. When you meet with a broker, bring your most recent ATO Notice of Assessment, your current HECS balance from myGov, and two to three months of payslips. A good broker will model your borrowing capacity across multiple lenders — including those with updated HECS policies — and show you the difference in black and white.

Exploring your full range of home loan options gives you the clearest picture of where you actually stand, not just where one bank tells you you stand.

Ready to Find Out How Much You Could Borrow?

The HECS changes in 2026 have created a genuine opportunity for first home buyers who previously felt constrained by their student debt. But the benefit only materialises if you’re applying with the right lender, structured the right way. At Lagos Financial, we compare your profile across lenders who’ve adopted the updated HECS policies and show you exactly what the difference looks like for your situation.

Book a complimentary assessment with our team today — no cost, no obligation.

Frequently Asked Questions

Does my HECS balance affect how much I can borrow for a home loan?

Yes — lenders include your HECS-HELP repayment obligation in serviceability assessments, which reduces your assessed borrowing capacity. Following the 2026 changes, the impact has reduced. The repayment threshold has risen to $67,000 on a marginal rate basis, and lenders like CBA and NAB now exclude near-repaid HECS balances. The extent of the impact depends on your balance, income, and which lender you use.

What does “near-repaid” mean under CBA and NAB’s new policy?

While the precise threshold varies by lender and can change with policy updates, “near-repaid” generally refers to balances small enough that the lender considers them a short-term liability — typically expected to be cleared within one to two years based on your income and repayment rate. A mortgage broker can confirm current thresholds with each lender and apply accordingly.

Can I get a bigger loan if I pay off my HECS before applying?

In many cases, yes. Paying down or clearing your HECS balance before applying can improve borrowing capacity by removing the repayment obligation from the serviceability calculation. Whether it’s worth using savings to pay off HECS early — rather than putting funds toward a deposit — depends on your specific numbers. A broker can model both scenarios and show you which approach gives the better outcome.

Do all lenders treat HECS the same way?

No. Lender policies vary considerably. Some lenders (CBA and NAB) have adopted progressive assessments that exclude near-repaid balances. Others still include HECS repayments in full. This is one of the clearest examples of why comparing across lenders — rather than going directly to your bank — can make a substantial difference to your home loan outcome.