The Great Australian Dream-to own your own home. To be debt free upon retirement.
But is it more tax effective to allocate additional mortgage repayments into your superannuation?
Advantages of making additional mortgage repayments
- Achieve security of owning your own home
- Flexibility- as many home loans allow you to re-draw additional repayments
- Interest payable saved by making additional repayments
Advantages of making superannuation contributions
- Tax effective environment- with earnings and concessional contributions taxed at a flat rate of 15% opposed to your marginal tax rate.
- Building your retirement nest egg.
- Upon retirement a lump sum of your superannuation can be withdrawn to completely pay off your mortgage, thus allowing you to be debt free at retirement.
It is important to consider:
- Are you comfortable with a higher level of debt over the long term
- Superannuation is not accessible for most people until the age of 60
- What is your marginal tax rate? The higher the income the greater the tax savings within superannuation.
Have any thoughts on this topic? Please leave us a comment below.