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Using super to repay your mortgage

Superannuation  |  18/04/2018  |   7 min read

Being mortgage free in retirement is something we all aspire to. One popular option is to take your superannuation as a lump sum and use that money to repay any outstanding loans. But there are a number of issues to consider.

What will I live on?

Superannuation is designed to provide you with an income in retirement. If you use the bulk of it to repay a mortgage that’s going to impact your savings and your future income.  In all likelihood you’ll have to rely on the Age Pension as either your primary source of income or to supplement your remaining superannuation.

The full Age Pension for singles is up to $23,597 and $35,573 for couples per annum. It starts to taper off if you have assets over $253,750 (single homeowner) and $380,500 (couple homeowners). 

Because the family home doesn’t count towards the Age Pension asset test, moving money from your super into your home has its advantages. It means your home is paid for, and your reduced superannuation balance may be offset by increased Age Pension payments.

What about the tax implications

Taking your super as a lump sum has serious tax implications which you need to be aware of. If you’re under 60 and access your super you may have to pay tax on the lump sum. And if you invest the money outside super you may be taxed on the interest it earns.

In other words, there are tax advantages to keeping your money within superannuation, and a financial planner can walk you through your individual situation, and the tax implications.

Other ways to pay off your mortgage

Using a lump sum superannuation is one way to pay off your mortgage, but it’s not the only one. If you’re several years away from retirement you can consider some of the following options.

  • Downsize to a smaller property

If you’re an empty nester that 4-bedroom suburban home may outlived its usefulness. Selling the home and moving into something a little smaller can help you prepare for the next stage of your life debt free, superannuation intact.

  • Review your home loan options

Not all bank loans are created equal, and small changes can quickly add up. Switching to fortnightly repayments, using an offset account, making additional repayments or simply shopping around for a better rate can all help you fast track repayment.

  • Speak to a financial planner

A financial planner can help you get the most out of your assets. Whether it’s investment properties, shares, superannuation or others assets, speaking with a professional can help you better understand your options.

Speak to an Equip financial planner and work out the best way to reduce your mortgage ahead of retirement. Click here for more info on our fees and services.

This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.  MySuper Authorisation Numbers 33813823017672 and 33813823017518  (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).

Equipsuper Financial Planning Pty Ltd (“EFP”) (ABN 84 124 491 078, AFSL 455010) is licensed to provide financial planning services to retail and wholesale clients. EFP is owned by Equipsuper Financial Holdings Pty Ltd (ABN 11 604 515 791). You can obtain the EFP Financial Services Guide and/or Privacy Statement by contacting our Helpline 1800 682 626.


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