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Grow your super

How can you help your super to thrive?

Mortgages and super

Buying a home

Buying property is a big financial decision and there are many issues to take into account beyond the obvious considerations of saving a deposit and budgeting for mortgage repayments and property maintenance.

Insuring your ability to pay the mortgage

You should consider how you would cover the mortgage and associated costs if you can longer work. There are a range of insurance options offered by super funds and other institutions that can cover you for illness, injury, loss of income or death.

If something was to happen and you could no longer pay the mortgage, the bank cannot take money from your superannuation account to recover the debt.

Your home is not a retirement plan

While it may be your biggest asset, your home should not be counted on to fund your retirement. For starters, most retirement projections showing ‘income required’ to live on in retirement, assume you own your own home outright. Also, the home where you live does not count towards the asset test to determine eligibility for the Age Pension.

While in some circumstances, downsizing your home to something smaller and less expensive at retirement may free up some capital, it is not advisable to count on it. Another path some people consider is a ‘reverse mortgage’ to fund their retirement. This is not a decision to be taken lightly and again, should not be seen as a retirement plan.

Accessing your super for mortgage repayments

People experiencing severe financial hardship may be able to access part of their super early to assist in meeting living expenses including mortgage payments. Alternatively, you may be able to make a ‘compassionate grounds’ withdrawal of super to prevent your lender forcing the sale of your home if you are in arrears on your mortgage. Accessing your super early is a detailed process, subject to strict conditions, and does not happen immediately.

The Australian Taxation Office has more information on the criteria for accessing super early. Or you can contact your fund.

Investing in property through super

As a general rule, you cannot take money out of your super fund to buy property. For those with a self-managed superannuation fund (SMSF), there are some special rules that allow money in your SMSF to be used to invest in property: but this is the super fund investing, not you as an individual. In other words, you cannot use money from your superannuation to buy a home for you or a family member to live in.