retiring with a mortgage

Still got a mortgage? You're not alone, and it doesn't have to stop you from retiring well.
 

A lot has changed since you started working: housing costs have gone up, many of us have taken career breaks, and some of us have worked part-time for years.

The result? More Australians — especially women — are heading into retirement still paying off a home loan.

That's okay. You’re not alone and there’s no need to panic. You just need a plan.
 

More of us are in this together

For those of us working in health and community services, chances are your working life hasn't been a straight line. Career breaks, part-time shifts and years of putting others first can all affect how much super you've built up — and whether your mortgage is paid off by the time you're ready to retire.

You're not behind. You're just in a different starting place. And there are real options available to you.
 

The big question is: should you pay off your mortgage or keep it?

There's no single right answer. It depends on your situation. But here are the two paths most people consider:

• Pay it off before you retire. You could use savings, or a lump sum from your super, to clear the debt. This means lower costs each month and one less thing to worry about.
• Keep the mortgage and manage it. Some people prefer to keep their super invested and make mortgage repayments from their retirement income instead. This can work — but it needs careful planning.

Neither option is automatically better. A financial adviser can help you work out what makes sense for you.

Will paying off your mortgage affect your Age Pension?

According to Steven Sadler, Head of Customer Service at Retirement Essentials, your home (with up to two hectares of land) is generally exempt from the assets test… even if it is worth $10 million!^*

However, Centrelink also doesn't take into account the mortgage on your home. So if you had $200,000 in the bank and a $200,000 mortgage, Centrelink will calculate that you have $200,000 in financial assets. If you used the $200,000 to reduce the mortgage then you will most likely get more pension (up to $15,600 more per annum for a couple^#).

Of course, everyone’s situation is different, which is why we would always recommend getting financial advice before making a decision.

Where to start

You don't need to figure it all out today. Start with these small steps:

• Log in to your online account or the HESTA app and check your super balance – it’s great to know where you’re starting from
• Call your home loan lender and ask about your current interest rate and how many years are left on your loan.

^*Check Services Australia for comprehensive information about the assets test.

^#Retirement Essentials, Optimising your pension, 9 November 2020

This information is of a general nature. It does not take into account your objectives, financial situation or specific needs so you should look at your own financial position and requirements before making a decision. You may wish to consult an adviser when doing this.

Third-party services are provided by parties other than H.E.S.T. Australia Ltd and under the terms and conditions of those parties. H.E.S.T. Australia Ltd does not recommend, endorse or accept any responsibility for the products and services offered by third parties or any liability for loss or damage incurred as a result of services provided by third parties. You should exercise your own judgment about the products and services being offered.

Retirement Essentials Pty Ltd. (ABN 35 615 383 232). Retirement Essentials Pty Ltd is an authorised representative of SuperEd Pty Ltd AFSL 468859.