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May 9 2022
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Mortgage vs super: weighing up your options

Mortgage or super? A question that many homeowners will face during the life of their loan. Should you use extra funds to pay off your mortgage or invest it in your super? There’s no one-size-fits-all answer but let’s see how the two options stack up.
Mortgage vs super Mortgage vs super

#1 Access to your money

A few factors could impact your decision here. Things like life stage, your savings balance and the length of time left on your mortgage.

Mortgage

If you have an offset or redraw facility attached to your home loan, you can use those as a way of paying off your loan sooner, while knowing that you can also access that money in an emergency. This can be particularly handy if your rainy-day savings account is looking a bit dry.

Super

Whereas the money you put into your super fund, typically can’t be accessed until you reach your ‘preservation age’. In saying that, this approach can be a great way of putting extra money aside for your future, knowing that you likely can’t dip into it until you reach your preservation age.

#2 Interest rates

Interest rates are calculated daily, so putting extra funds towards your home loan early means paying less interest in the long run. If rates are low, generally your minimum repayments are lower meaning you'd have more cash you could use to make extra repayments on your loan. 

Mortgage

Interest rates are calculated daily, so putting extra funds towards your home loan early means paying less interest in the long run. If rates are low, generally your minimum repayments are lower meaning you'd have more cash you could use to make extra repayments on your loan.

Super

Alternatively, low mortgage rates could mean reduced repayments which in turn could free up some funds. You might choose to invest this money in your super to take advantage of the potential tax perks.

#3 Tax impacts

Here are some tax related benefits that are worth considering when weighing up your options.

Mortgage

Unless you own an investment property or home-based business, the interest you pay on your home loan is generally not tax deductible.

Super

There are super strategies that may benefit you at tax time. Pre-tax super contributions are taxed at 15% (or 30% if you earn over $250,000) which may be lower than your individual income tax rate. If you are considering this option, remember to check your concessional contribution cap as contributions in excess of your cap may attract extra tax.

So, what now?

Ultimately, it all comes down to your personal circumstances and comfort zone. You might feel more at ease owning your home sooner and reducing the interest you may pay overtime. Alternatively, you may feel better knowing that your extra savings are being invested inside your superannuation.

Advice

Still unsure?

Our team of financial advisers are on hand to help. As a Rest member, you can get the support and advice you need to help you make the right decision.


Book a call today 


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