Accessing Your Super to Pay Off Your Mortgage: The Pros and Cons

February 7, 2023

 

If you’re considering accessing your super to pay off your mortgage, you’re not alone. Many Australians are turning to their superannuation to help them pay off their mortgage faster and reduce their debt. But is it a good idea?

 

In this blog post, we’ll explore the pros and cons of accessing your super to pay off your mortgage. We’ll look at the potential benefits and drawbacks of this strategy, and help you decide if it’s the right move for you.

 

What is Superannuation?

 

Before we dive into the pros and cons of accessing your super to pay off your mortgage, let’s quickly define superannuation. Superannuation is a type of retirement savings account that is funded by your employer and the government. It’s designed to provide you with an income when you retire.

 

The Pros of Accessing Your Super to Pay Off Your Mortgage

 

There are several potential benefits of accessing your super to pay off your mortgage. Here are some of the most common:

 

1. Lower Interest Rates: Superannuation funds typically offer lower interest rates than mortgages. This means that you could potentially save money on interest payments by using your super to pay off your mortgage.

 

2. Tax Benefits: Superannuation funds are generally tax-free, which means that you won’t have to pay any taxes on the money you withdraw from your super to pay off your mortgage.

 

3. Faster Mortgage Repayment: By using your super to pay off your mortgage, you could potentially pay off your mortgage faster. This could save you thousands of dollars in interest payments over the life of your loan.

 

4. More Financial Flexibility: Accessing your super to pay off your mortgage could give you more financial flexibility. You could use the money you save on interest payments to invest in other areas or use it to pay off other debts.

 

The Cons of Accessing Your Super to Pay Off Your Mortgage

 

While there are several potential benefits of accessing your super to pay off your mortgage, there are also some drawbacks to consider. Here are some of the most common:

A big house under blue sky with trees and flowers

 

1. Early Access Penalties: If you withdraw money from your super before you reach retirement age, you may be subject to early access penalties. This could significantly reduce the amount of money you have available to pay off your mortgage.

 

2. Reduced Retirement Savings: By using your super to pay off your mortgage, you’ll be reducing the amount of money you have available for retirement. This could leave you with less money to live on when you retire.

 

3. Reduced Investment Returns: Superannuation funds typically offer higher returns than mortgages. By using your super to pay off your mortgage, you’ll be sacrificing potential investment returns.

 

 

4. Reduced Insurance Coverage: Some superannuation funds offer insurance coverage, such as life insurance or income protection. By using your super to pay off your mortgage, you may be sacrificing this coverage.

 

 

Should You Access Your Super to Pay Off Your Mortgage?

 

Accessing your super to pay off your mortgage can be a good strategy for some people, but it’s not right for everyone. Before you make a decision, it’s important to consider your individual circumstances and weigh up the pros and cons.

 

If you’re considering accessing your super to pay off your mortgage, it’s a good idea to speak to a financial advisor. They can help you understand the potential benefits and drawbacks of this strategy, and help you decide if it’s the right move for you.

 

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