The once considered “good debt” is now indexed at 7 percent on existing HELP loans.
Borrowers need to realise that this so-called “good debt” impacts their mortgage loan serviceability.
Whilst these loans, now known as Higher Education Loan Program (HELP), are interest free, they are subject to indexation, with the outstanding balance adjusted each year in line with inflation.
While the HELP debt is forgiven upon death, lenders do include the debt into their serviceability requirements. Often overlooked, this is another liability that borrowers need to be more aware of.
When applying for a mortgage loan, a discussion should be undertaken to include the HELP loan in the funding requirements over a short period, of say 5 years, subject to the lenders serviceability requirements.