Carrying a mortgage into retirement allows individuals to tap into an additional stream of income by reinvesting the equity from a home. The other benefit is that mortgage interest is tax-deductible. On the downside, investment returns can be variable while mortgage payment requirements are fixed.
In fact, O'Leary insists that it's a good idea to be debt-free by age 45 -- and that includes having your mortgage paid off. Of course, it's one thing to shed a credit card balance by age 45. But many people don't first buy a home until they reach their 30s.
Assuming that the average mortgage age in Australia starts somewhere between 25 and 34 years, then to work out the average age to pay off a mortgage in Australia, you just need to add a 25 to a 30-year term. This would make the average age to pay off a mortgage in Australia between 50 and 64 years.
If you take out a mortgage using your home as security, and give the money to your children or anyone else (for example, to help them buy their own property), Centrelink will treat the loan as your asset and deem that you are earning income from the money you borrowed. This may mean your pension will be reduced.
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.
Once you contribute money to your super you generally can't access it again until you retire. So it's important to think about timing. If you'll need the money before you retire, paying off your mortgage is a better option because you may be able to redraw the money or access the equity in your home.
If your income is less certain it makes more sense to pay down your mortgage. If your work income is stable, investing is more attractive. There's less risk you'll need to sell down your portfolio early to meet mortgage repayments.
Assets Test
A single homeowner can have up to $634,750 of assessable assets and receive a part pension – for a single non-homeowner the higher threshold is $859,250. For a couple, the higher threshold to $954,000 for a homeowner and $1,178,500 for a non-homeowner.
If you had, say, $200,000 in superannuation and investments at age 50, you would need to save around $300 per month, earn around 6% p.a. on your savings and become debt-free in order to reach the target of $600,000 by age 65.
It's increasingly common for Australians to head into retirement with a mortgage. This is true for about 6% of retirees, and that figure is expected to grow as housing prices rise faster than earnings.
A mortgage has become a bigger and more significant part of the lives of Australians. The number of Aussies who own their home with no debt has halved over the past 20 years, while the number of retirees ending work with a mortgage has tripled.
What are the benefits of being mortgage free? Having more disposable income, and no interest to pay, are just some of the great benefits to being mortgage free. When you pay off your mortgage, you'll have much more money to put into savings, spend on yourself and access when you need it.
The Bottom Line
Paying off your mortgage early can save you a lot of money in the long run. Even a small extra monthly payment can allow you to own your home sooner. Make sure you have an emergency fund before you put your money toward your loan.
Data from the Council for Community and Economic Research (C2ER)'s 2022 Annual Cost of Living Index shows that the national average monthly mortgage payment is $1,768. This figure differs from the median monthly payment in the U.S., which is $1,532.
If you use a part of your principal home for business only, that will be included in your assets test - land or buildings. Centrelink advises you need to contact them within 14 days of selling the home.
The first full payment at the new rates of pension will be payday 6 April 2023. The maximum rate of single service pension will rise by $37.50 to $1,064.00 per fortnight and the maximum rate for couples will increase by $28.20 to $802.00 per fortnight (each).
From 1 July 2023, Age Pension age will be 67 years, if you were born on or after 1 January 1957.
Can I Get the Pension if I Have Super? Having superannuation savings does not deny you from receiving Age Pension payments. Eligibility for the Age Pension is based on an Assets Test and an Income Test.
We check your bank account information is up to date. We do this to check we paid you the right payment and amount in the past.
For example, it has the power to obtain your information from other government agencies as well as accessing information from banks, building societies and credit union accounts. It can do this without your prior consent or knowledge. Centrelink's investigation is not limited to recent deposits.
You will most likely have to discharge your mortgage once you've paid off your home loan in full. The procedure of formally removing your lender from your Certificate of Title is known as a discharge. Notifying your lender is usually the first step in discharging your mortgage.
Should you pay off your primary home or rental property? It really depends on your circumstances. It is wise to pay off any debt at all if you want equity. However, it is also wise to use the money to invest in a second investment property, especially if you're going to generate more wealth in the long run.
Bottom line. Very rarely should you sell your investments to pay off debt. The one exception here is if you have high-interest debt (like an outstanding credit card balance), but even then there are alternatives to consider before using your investments as repayment.