Money - 14 Nov, 2019

Can I use my super to pay off my mortgage?

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In some circumstances, super can be used to pay off mortgage debt, and according to the research, many Australians are already using their superannuation to pay off their home loans.

According to the data, this is due to the rising cost of living. In fact, most Australians feel that they’ll enter retirement with considerable debt. But with planning, this doesn’t need to be the case.


Australian Debt

Those stressing about keeping up with their home loan repayments are not alone. A 2019 report published by the Australian Housing and Urban Research Institute shows that a concerning number of older Australians are suffering from mortgage stress. Key findings from the report include:

  • The mortgage debt held by Australians aged 55 years increased by 600% between the period of 1987-2015.
  • Changes to tenure and demographics will mean that the need for Commonwealth Rent Assistance will increase by 60% by 2031.
  • More than 50% of 55-64-year-old homeowners will still be paying off their mortgages in 2031.
  • 80% of the average total debt of older Australians comprised of property debt.
  • One-quarter of the total asset holdings of older Australians comprised of superannuation.
  • There has been an increasing decline in homeownership amongst older Australians, with ‘mortgage stress’ being the primary cause of this.

Retirement Funds

With many Australians feeling they won’t have enough to retire on, it’s important to understand why this is, to improve your own retirement options.

The latest MLC Wealth and Retirement Behaviour Survey has given a snapshot of Australian retirement behaviours, showing:

  • 3% of retirees have used equity in their home loan to fund their retirement.
  • 17% reported it’s the high cost of living that causes the most anxiety in relation to life in retirement.
  • 1 in 20 of those surveyed believe that by the age of 75 they’ll still be in the workforce.
  • 29% of people surveyed aged 55-69 are investing in defensive assets such as cash investments, which experienced a 3% increase from the previous year.
  • $631,000 was the average amount that retirees said they needed in order to afford their desired retirement lifestyle.
aussies-using-super-pay-off-mortgages

Increasing use of super

The 2019 Household, Income and Labour Dynamics in Australia Survey (HILDA) has revealed an increased reliance on superannuation among older Australians. The survey found there’s been:

  • A decline in the reliance on welfare as a source of income for people aged over 65.
  • An increased use of superannuation is believed to be the cause of this decline.

The survey also reported super as being the most salary-sacrificed item. Over 50% of people who use a form of salary sacrifice engaged with some kind of superannuation fund.

The results were reinforced by recent data from the Australian Bureau of Statistics, which has revealed that the number of households who are using superannuation as their primary income source has increased by over 200,000 households.

Reliance on super to reduce financial stress

With more people relying on their superannuation money, it’s no surprise that superannuation is being used to alleviate mortgage stress.

A 2019 Report from the Treasury has revealed that it is also becoming increasingly common for people to apply for an early release of superannuation benefits in order to make mortgage payments. However, in order to be eligible to pay off your mortgage with super, you must fulfil the criteria of having ‘compassionate circumstances’ or show ‘financial hardship.’

Despite the tiresome application process, statistics show that you could have good chances of having your application approved. Statistics from the Treasury in 2017 show that almost a fifth of applications that were approved for early release were for mortgage payments.

You can use super to pay off your mortgage, but it should be a last resort

So, are your finances putting you in a position of anxiety about retirement debt? Alleviate your stress by acting early, and you could be using your super to start chipping away at your mortgage.

But remember, planning for retirement can avoid you having to use your super in the first place. Planning 10 to 15-years before you retire should give you adequate time to get your finances in order.

Words by Vidya Kathirgamalingam

Want to know more about your options for investing in property during retirement? Contact eChioice and we’ll help you find the right deal. Our brokers have access to 100’s of home loan products, so we’ll be able to find you the right mortgage.

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