Should you withdraw from your super to pay off your homeloan?
Now, when the property prices have risen so much, not only it is more difficult for younger generation to buy their first home, but it is also more difficult for older generation to pay off all their loans. Therefore, the number of retirees have to face the fact of having the mortgage when they reach the retirement age.
So why this is happening that more and more people face to enter retirement with the mortgage still not fully paid off? And is withdrawing funds from super an answer?
Let's try to first find the answer to this question: Why is it more difficult to pay off the home-loan now than years ago?
1. Higher property prices - this is a pretty obvious reason. It takes now 10 times the average wage to service the loan, comparing to 3 or 4 times 20 years ago.
2. Delayed entry - The high property prices in many cases delay the entry time to buy a family home, therefore it leaves fewer working years to have that loan paid off.
3. Lifestyle - I think these days it is also a different way of looking at life and priorities. 20 years ago a couple would sacrifice their lifestyle to the maximum to have that home loan paid off asap, but now we look at home loan as one of our responsibilities, but at the same time, we want to have lifestyle, holidays, nice things in the house, social life etc. that is reducing your capabilities of additional repayments.
4. Current low interest rate environment - well maybe that does not apply to everyone, but most certainly some people are taking advantage of higher earnings from shares or superannuation or investment properties, with all providing great deal of tax benefits.
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