Homeowners are often faced with the question of which debt to pay off first - mortgage or superannuation? The answer is not a one-size-fits-all approach, as it depends on personal circumstances and your long-term financial goals. Whether you're looking to save money, build wealth, or both, there are pros and cons to consider when deciding between mortgage and superannuation repayments. Let's break down the benefits of each option.
Benefits of paying off the mortgage first
One benefit of paying off your mortgage first is that you will have more money in your pocket sooner, which can free up extra cash for things like investments or retirement savings. In addition, when you pay off your mortgage, you no longer need to worry about interest rate hikes or other unexpected costs associated with having a mortgage over your home. Plus, if your property is an investment property, once your mortgage has been paid off, all future earnings from renting out the property become yours - rather than going towards loan repayments.
Benefits of investing in superannuation
Investing in superannuation instead of paying off your mortgage can also have its advantages. Firstly, some personal contributions made into super are tax deductible, which means you can save money by taking advantage of this tax break. Secondly, making regular contributions to your super allows for compound growth over time - meaning the earlier you start contributing, the bigger the return could be down the line. Lastly, if you invest wisely (and with a good strategy), then investing in superannuation may provide better returns than paying off your mortgage early would.
Other debts to consider
It's also important to consider handling other types of debt first. Debt, such as credit cards and personal loans, can have much higher interest rates than your mortgage. It's important to pay these off before focusing on payments for your mortgage or contributions to your super. However, each person's financial situation or circumstances is different, so always seek professional advice about how best to handle your money.
Deciding whether to pay off your mortgage first or invest in superannuation is an individual choice that depends on your overall financial situation and goals for the future. While there are benefits to both options - such as saving money through tax deductions and building wealth through compound growth - it ultimately comes down to what works best for you and how comfortable you feel managing debt versus investing for the future.
Before making any decisions, though, it's important to speak with a licenced financial adviser who can provide tailored advice appropriate to your individual objectives, financial situation or needs.
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