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Paying your mortgage vs. adding to your super

If you’re lucky enough to have a bit of cash left over at the end of the month, you might be thinking about how to make the most of it. Is it sensible to put it towards reducing your mortgage, or will it work harder as an addition to your super savings? While they’re both responsible choices, here are a few thoughts that might help you to make a decision.

Mortgage contributions

  • Paying off your mortgage quickly will reduce the amount of interest you’ll owe over the longer term. With interest rates currently at an all-time low, this benefit may seem less relevant at the moment, however, keep in mind that this won’t be the case forever.

  • If your mortgage has an offset facility, you can put your money towards paying it off while still being able to draw down cash if you need it down the line.

  • Consider making weekly or fortnightly payments rather than monthly payments to help pay off your mortgage faster, and don’t forget to check in with your mortgage provider to make sure you’re getting the best interest rates.

  • Finally, although it’s not an economic benefit, knowing that you’ve paid off your property can be a big stress reliever. So if the pressure of your home loan is weighing on you then don’t underestimate the importance of peace of mind.

Super top up

  • Super is built on compound interest, so any contributions you’re able to make now are likely to grow by the time you’re in retirement. Canstar’s calculator says that an extra $200 per month contributed to super over 27 years could leave you with $77,113 extra upon your retirement.

  • Sacrificing extra money into your super can come with tax benefits, since it will be taxed at the concessional rate of 15% rather than your usual marginal rate.

  • One consideration if you’re thinking of contributing to your super is that you won’t be able to access the cash should you need to in the future. The right decision for you will depend on a few different factors, like when you’re planning to retire and how long you’ve had your mortgage. If you’d like to chat through your options of course I’d be glad to talk – please reach out.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors.

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