You’ve got some super and you’ve got a mortgage. Your super is yours and you want to pay-off your mortgage, so surely it’s a simple equation, right? Withdraw your super and pay-off your mortgage!
So, can you use super to pay off your mortgage? Let’s find out.
Can I Use Super to Pay Off My Mortgage?
You can use your super to pay off your mortgage, provided you are eligible to access your super.
There are a number of ways to access your super. In some instances you will have full access to your super and other times you will have partial access to your super. It all depends on your situation. In most cases it will depend on your age and whether you are still working or retired.
Can I Use My Super to Pay Off My Mortgage When I Retire?
You can use your super to pay off your mortgage when you retire, provided you have attained your superannuation preservation age and satisfied the superannuation definition of retirement.
What is My Superannuation Preservation Age
Your superannuation preservation age is generally the first time you will have access to your superannuation, regardless of whether you are still working or retired. The amount of super you will have access to upon reaching your preservation age will depend on whether you are still working, or retired with no intention of returning to work.
Your superannuation preservation age is based on your month and year of birth, as follows:
|Date of Birth||Preservation Age|
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
|After 30 June 1964||60|
If you have reached your preservation age you can, at the very least, access your super via a transition to retirement income stream. But, you may also be eligible to access your total account balance if you have the superannuation definition of retirement.
What is a Transition to Retirement Pension?
A transition to retirement (TTR) income stream allows you to receive an income of up to 10% of your TTR pension balance each financial year.
You can then use this TTR pension income to reduce or pay off your mortgage.
You should be mindful, however, of any income tax on TTR pension payments, if you receive such payments while under age 60. You also need to be aware of the risks of completely closing an accumulation account to start a TTR pension.
What is the Superannuation Definition of Retirement?
- Have reached your preservation age and are retired, with no intention of returning to full-time or part-time work ever again; or
- Had an employment arrangement come to an end after attaining age 60; or
Then you have met the superannuation definition of retirement and will have full access to your super balance.
Again, you should be mindful of any tax on super withdrawals payable if you are under age 60.
Alternatively, if you have reached age 65, you will have full, tax-free access to your super.
In any of these instances, you can use your super to pay off your mortgage.
Early Release of Super to Pay Mortgage
It’s possible you may be eligible for early release of super to pay your mortgage, prior to reaching your preservation age. Early access to your super includes, but is not limited to:
- Access on compassionate grounds
- Access due to severe financial hardship
- Access due to a terminal medical condition
- Access due to permanent or temporary incapacity
However, very strict conditions need to be met for early release of your super under one of these conditions. Further, the amount you can access may be limited and tax on withdrawals may be payable. Read more here.
How To Use Super to Pay Mortgage
The way to use your super to pay your mortgage is to contact your superannuation fund and notify them of the condition you have satisfied in order to be eligible to access your super. Usually, your super fund will have a withdrawal form on their website which will require you to tick the appropriate box as to why you are eligible. This is a legal declaration that you are making when checking the box and there are severe penalties for unlawful early access to your super.
If you are unsure about your eligibility or the process of completing forms, you should contact your super fund and explain your situation.
You should also speak with your accountant or financial planner about tax or other implications of accessing your super.
Then, you can use this withdrawal from super to pay off your mortgage.
Related Article: Are Financial Advisers Worth It?
Can I Use Super to Pay Off a Loan?
You can use super to pay off a loan, provided you are eligible to access your super. Whether you are using your super to pay off a home loan, investment loan, car loan or personal loan, there is no difference in your eligibility. In all instances you are required to first satisfy a superannuation condition of release. And, as always, it is best to seek professional advice prior to doing so.
Should I Use My Super to Pay My Mortgage?
Whether or not you should use your super to pay your mortgage will depend on factors such as the interest rate on your mortgage, the expected earnings from your super, tax on super withdrawals and the level of income you require in retirement. But, ultimately, deciding whether to use your super to pay your mortgage will come down to what’s important to you. There is no right or wrong answer, just pros and cons of each.
There are a number of calculations and considerations that will help you decide whether you should use your super to pay your mortgage. It’s always best to obtain professional advice from your financial adviser to get the best outcome for your situation.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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