I am 39 and my husband is 46. We have two young children. Should we use extra money to top up my husband’s superannuation or keep it in our offset account to pay down the mortgage more quickly? In November, we bought a four-bedroom home worth $1.9 million, with a $1 million mortgage, at an interest rate of 2.75 per cent. We have $70,000 in our offset account. My super balance is $170,000 and my husband’s balance is $135,000. We have no other debts or investments. J.K.
You are highly vulnerable to economic change and dependent on a continuing high level of family income, but you are not Robinson Crusoe.
Putting extra cash into an offset account can build a buffer in case interest rates rise and paying the mortgage becomes difficult.
Putting extra cash into an offset account can build a buffer in case interest rates rise and paying the mortgage becomes difficult.CREDIT:
As a result of sky-high property prices, Australians have some of the highest levels of personal debt in the world.
To pay off a $930,000 debt at 2.75 per cent will cost more than $45,500 a year for 30 years, paid from your after-tax income.
If you both work and your combined incomes have an average tax rate of, say, 33 per cent, then the first $69,000 you earn each year will go towards your mortgage.
However, interest rates are unlikely to stay this low. Some analysts expect inflation to rise as a result of all the trillions being spent to fight the COVID-19 pandemic, which will push up interest rates, so mortgages must take priority over super.
https://www.watoday.com.au/money/super-and-retirement/when-mortgage-offset-deposits-trump-super-20200521-p54v6k.html