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CBA Changes HECS Debt Rules for Home Loans
Dreaming of homeownership but struggling with your HECS-HELP debt? Commonwealth Bank (CBA) is making it easier. As the first of Australia's Big Four banks, CBA has announced significant changes to its home loan assessment criteria, effectively reducing the impact of student debt on borrowing power. This move could unlock homeownership for thousands of Australians.
How CBA is Helping Homebuyers with HECS Debt
Starting April 9th, 2024, CBA will no longer include HECS-HELP debt in serviceability assessments if the debt is repayable within 12 months. This means borrowers can qualify for significantly larger loans. For example, a couple earning $240,000 annually could see their borrowing power increase by a substantial $187,000.
For those with two to five years remaining on their HECS debt, CBA is piloting a reduced serviceability buffer. Instead of the standard 3% added to the interest rate, CBA will use a 1% buffer. This significantly reduces the assessed interest rate, increasing borrowing capacity and making it easier to secure a mortgage.
Why the Change?
This initiative follows Treasurer Jim Chalmers' call for a review of lending guidelines regarding HELP debts. The argument is that HECS-HELP debt differs from other debts; repayments are income-contingent and pause if the borrower loses their job. CBA recognizes this and is adapting its lending practices accordingly.
What it Means for You
This change offers a considerable boost to borrowing power for many Australians burdened by student debt. It's a significant step towards making homeownership more attainable, especially for younger generations. Mortgage brokers are already hailing the move and expect other banks to follow suit to remain competitive.
Beyond CBA: A Call for Wider Adoption
The Finance Brokers Association of Australia (FBAA) is urging other banks to adopt similar policies. They argue that many financially capable individuals are unfairly excluded from the property market due to current lending practices. The FBAA even suggests a reduced serviceability buffer should be considered for *all* borrowers, not just those with HECS debt.
Take Action
If you're a homeowner hoping to buy or refinance, explore CBA’s new home loan options. Contact your mortgage broker or the bank directly to understand how these changes might benefit you. Don't let your HECS debt stand in the way of your dream home.
