Using Super To Make Mortgage Payments

By Mark Cunningham

Although the wider economic situation has improved of late, some people are dipping into their retirement savings to help meet their monthly mortgage payments. An increase in people being forced to work fewer hours and being paid less has meant that they have had to find other means to save their homes from repossession.

Super fund trustees are reporting an amazing rise in the number of people drawing on their compulsory retirement funds as rates soar. Many of these people have used their redraw facilities to pay off credit card debt because their mortgages are at lower rates. Others have refinanced by combining credit card debt and their mortgage and now find that they stand to lose the lot.

Consolidating debts in this way involved setting up a mortgage and paying off other loans with the funds.

Sometimes when people are convinced to combine their debts they are not fully informed about all the costs involved in refinancing and the fact that these fees can be added to the loans. This could, in turn, add more interest to the loan or extend the term.

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Secured debt is currently about half the interest rate of unsecured debt. This means that if you can borrow about $20,000 on your mortgage instead of your credit card your total interest payments could reduce. This is because your credit card will have a higher interest rate.

There is no problem with such a loan if you actually then trim your spending to allow you to make payments. However, some people do not learn from their past borrowing mistakes. Some people will see that their credit card has been repaid and will simply go out and run up more debt.

Data from the Reserve Bank of Australia shows that in the past 18 years the total amount of debt owed by Australian households has risen almost six-fold. The Consumer Credit Legal Centre says spending on credit cards is more a psychological issue than a financial one. The same goes for redraw facilities.

Responsible mortgage brokers won’t let you borrow more than you can afford to repay. They know that no-one wins if you adopt ‘the new black’ and go bankrupt. Drawing money out of your retirement fund will mean that you will have less money for your retirement years. If your super is still intact, the employer contribution is generally protected from creditors if you go bankrupt.

Be careful, once you have been refinanced and trimmed expenses to what you can actually afford, you should ensure that your mortgage broker does not sell you a mortgage that you cannot afford. You are responsible for the final decision on how much to borrow. Be truthful and practical and open with your broker during your discussions.

Make sure you take charge of your borrowing situation whenever you feel you must. It is your home that will be at stake – not your mortgage broker’s home. In the end the buck stops with you so be sure to borrow responsibly and take care of your home loan.

About the Author: Your local firm of Mortgage Brokers are standing by to help you with your next home loan at Contact us today.


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