Super vs Mortgage: Where Should You Put Your Extra?

Deciding whether to invest your money in your superannuation or use it to pay off your mortgage can be a difficult choice. Both superannuation and mortgage have a significant impact on our lives. Superannuation is a retirement savings plan in Australia, while a mortgage is a loan taken out to purchase property. 

As these decisions can be complicated, you must carefully analyse your options. You need to consider several factors when deciding between super vs mortgage. One of the main factors is the impact on your future financial goals. You must also consider other personal circumstances as job stability, existing debt, and interest rates. 

Ultimately, it boils down to whether you want to reduce your debt faster or save for your future. 

This article provides a comprehensive guide for individuals struggling to decide whether to prioritise paying off their mortgage or making extra contributions to their superannuation.

Is it better to invest in super or mortgage?


Paying off your mortgage is a significant financial milestone, but is it always the right decision to prioritise it above other financial obligations, such as securing retirement by making contributions to your super?

Generally, investing in super offers long-term compounding growth and tax advantages, but can be very unstable at the same time. Investing in property can provide a more immediate return in the form of rental income or capital gains. However, depending on your financial situation, investment goals, risk tolerance, and future plans, it’s essential to weigh the pros and cons of each option.

Let’s start by looking at the pros and cons of paying off your mortgage.

Pros of Paying off Your Mortgage First:

  • Lower interest payments: Paying off your mortgage early means you will pay less in interest over time, which can save you a significant amount of money in the long run.
  • Financial security: By paying off your mortgage, you will have the security of owning your home outright and not worrying about making monthly payments.
  • Potential to increase savings: Once you have paid off your mortgage, you may have more disposable income towards other financial goals, such as retirement or investing.

Cons of Paying off Your Mortgage First:

  • Missed investment opportunities: By putting all your extra money towards paying off your mortgage, you may miss out on investment opportunities that could earn you a higher return on your money. You may also miss out on the potential long-term gains from compound interest by not contributing to your super.
  • Insufficient retirement fund: Your retirement savings may not be sufficient if you prioritise paying off your mortgage over making super contributions.
  • Lack of liquidity: You may need more flexibility in your budget in the short term as you will be putting more money towards mortgage payments.
  • Tax expense: You might need to start paying tax if your income is positive geared.

The pros and cons of investing in your super

Compared with the pros and cons of paying off your mortgage first, investing in your super also has its advantages and disadvantages. Here are some of the pros and cons to consider:

Pros of investing in your super:

  • Tax benefits: Super contributions are tax-deductible and can help to reduce income tax. You can offset tax on your personal income by contributing to your super account, which is generally taxed at 15%.
  • Compound interest: Your super account benefits from compound interest, which means your savings can grow exponentially over time.
  • Employer contributions: Many employers must contribute to their employees’ super accounts, which can increase your retirement savings without you having to contribute extra money.
  • Long-term savings: Investing in your super is a long-term commitment, which can help you accumulate significant money for retirement.

Cons of investing in your super:

  • Limited access: Superannuation is designed to be accessed only after you reach your preservation age, so you may not be able to access your money in an emergency.
  • Investment risk: Your super account is subject to market volatility, which can lead to losses in your retirement savings.
  • Fees: Super accounts can come with fees and charges, which can eat into your retirement savings over time.
  • Lack of control: You may need control over how your superannuation funds are invested, as this is often left to the discretion of the super fund manager.

Factors to consider when deciding between super vs mortgage

Age and retirement goals

When deciding between prioritising mortgage payments or contributions to your super account, there are several factors to consider. One of the most critical factors is your age and retirement goals. 

If you’re close to retirement age, maximising your super contributions is crucial, as you may need more time to save enough money for a comfortable retirement.

However, if you’re young and just starting your career, you may have more time to pay off your mortgage and still contribute to your super account. But remember that contributing to your super means you will only have access to that money for a short time, so you have less control over it. It’s important to weigh each option’s pros and cons based on your circumstances and financial goals.

When considering retirement goals, you must consider the type of retirement you want and how much money you need to achieve them. Consider where you want to live, what activities you want to do, and how much money you will need to cover expenses. It’s important to remember that everyone has a different idea of a comfortable retirement, which can significantly impact your decision between super and mortgage.

If you have less time to save, prioritising super contributions may be the best option to ensure you have enough money for a comfortable retirement. However, if you have more time to save, you may pay off your mortgage first and then increase your super contributions later.

Assess your income, expenses and debts

You must also consider your income and expenses when deciding between paying off your mortgage or contributing to your super account. You can allocate more funds towards your mortgage and super if you have a higher income. However, your monthly expenses will impact how much you must put towards each.

Evaluating your available funds and determining how much extra money you can allocate towards your mortgage or super is crucial. But before that, you also need to ensure that you are debt free.

However, if you have any outstanding debts, it may be better to prioritise paying them off before focusing on your mortgage or super contributions. You should also consider the interest rates on your other debts and compare them to the interest rates on your mortgage and super account to decide which payments to prioritise.

Job stability and career plans

If you have an unstable job, it’s important to prioritise paying off your mortgage in case you lose your job and have trouble making payments. Additionally, changes in your career plans may impact your ability to make mortgage or super payments, so you must consider your financial situation carefully. 

Tax implications: concessional vs non-concessional

When it comes to superannuation, there are two main types of contributions: concessional and non-concessional. 

Concessional contributions are made pre-tax, such as through personal contribution allowed as an income tax deduction, and are taxed at a rate of 15%. On the other hand, non-concessional contributions are made after-tax and are not taxed when they are withdrawn.

When considering the tax implications of superannuation, it’s important to understand that making concessional contributions can reduce your taxable income and therefore decrease the amount of tax you pay. However, there are caps on how much you can contribute each year, and exceeding these caps can result in additional taxes and penalties.

For mortgages, the tax implications are primarily related to the deductibility of interest payments. In general, interest payments on a loan taken out to purchase an investment property can be claimed as a tax deduction, while interest payments on a loan taken out for a primary residence cannot be claimed as a deduction.

Understanding the tax implications of contributing to your superannuation and the tax implications of interest payments on your mortgage can help you decide where you want to contribute your extra money between super and mortgage.

Get a free Australian mortgage assessment today.

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Is there a tax benefit in making extra mortgage repayments?

Making extra repayments on your home loan doesn’t offer any immediate tax benefits.  However, there are some indirect tax benefits that can be gained through making extra repayments on your mortgage.

One of the main indirect tax benefits of making extra mortgage repayments is that it can reduce the amount of interest you pay on your mortgage over time. But there’s a caveat. Because although you are able to reduce your interest rate (meaning more money saved), you will have to pay more taxable income. 

Another indirect tax benefit is that by paying off your mortgage sooner, you may have more disposable income available to invest elsewhere. This can provide opportunities for capital gains or income that may be subject to taxation.

Furthermore, it’s worth noting that any extra repayments can be withdrawn through a redraw facility or offset account. This offers more flexibility over your control over your contributions. 

In contrast, you can’t access the extra contributions to your super fund until you reach the preservation age. However, it guarantees that the funds are secured for your retirement.

Making the right choice between prioritizing your mortgage or super payments​

Whether you want to prioritise your super or mortgage payments depends on your unique situation and goals. While paying off your mortgage can provide the security of owning your home outright and potentially saving on interest payments, investing in your super can offer tax benefits and long-term financial security in retirement. 

If you’re trying to decide between prioritising your mortgage or super payments, it’s crucial to consider various factors that can impact your financial situation. That’s why it’s much easier if you have an expert by your side to guide you through it all. 

Odin Mortgage is here to help you navigate these decisions and find the best solution for your unique needs. 

Contact us today to speak with our expert brokers and receive tailored guidance to your financial needs.

Frequently asked questions​

You can use your super to pay off your mortgage if you are eligible to access your super. You can only access your super when you:

  • Reach preservation age and retire.
  • Turn 65 even if you’re still working.

Even then, you need to ensure that you have a sufficient amount of super balance on your super fund. You can take it out as a lump sum or as regular payments. 

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.
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