Can I Use My Super To Pay Off My Mortgage?

Find out more about whether you can use super to pay off your mortgage with Savvy today.

Last updated on April 20th, 2022 at 03:21 pm by Cate Cook

Can I use my super to pay off my mortgage?

If you’re wondering if you can use your super to pay off your mortgage you’ve come to the right place.  Find out more about using your superannuation to pay off your home loan and whether it’s possible for you at your current age.  Savvy can help you make informed decisions by comparing financial products and presenting comparison information side-by-side, giving you the tools to pick the best mortgage for your needs.

Can I use my super to pay off my mortgage?

Whether you can use your superannuation to pay off your mortgage will depend completely on your age.  If you’re past what’s called your super ‘preservation age’, the answer is yes, you can withdraw from your super account to pay off your mortgage.  However, if you have not yet reached your preservation age, you won’t be permitted to use your super to pay your mortgage.

What is super ‘preservation age?

Your preservation age is the age at which you’re allowed to access your super (as long as you meet a condition of release).   These conditions of release are rules which govern when you can access your super to pay off your mortgage (or for other reasons, such as reinvestment or to pay for a retirement holiday).

Your preservation age is determined by the year you were born in.  If you were born before 1 July 1960, your preservation age is 55.  In each year thereafter, the preservation age increases by one up to a maximum of 60 as follows:

Preservation age based on date of birth

Date of birth Preservation age
Before 1 July 1960
1 July 1960 – 30 June 1961
1 July 1961 – 30 June 1962
1 July 1962 – 30 June 1963
1 July 1963 – 30 June 1964
From 1 July 1964

Your superannuation is divided into three categories, with the category your funds are in determining whether you can access them before your preservation age.  In general, after you’ve reached your preservation age and satisfy a condition of release, you will be able to access all of your super to pay off your mortgage.  If you’re still below your preservation age, you’ll only be permitted to access super funds which are unrestricted and non-preserved.

The three categories of superannuation are:

  • Preserved benefits (all contributions made after 30th June 1999)
  • Restricted non-preserved benefits (contributions made between 1st July 1983 and 30th June 1999)
  • Unrestricted non-preserved benefits (money held by your super provider that you can access at any time with no limits on it, assuming your provider’s rules allow you to)

The condition of release you’ll be required to satisfy will be one of the following:

  • you’ve reached your preservation age and retired
  • you’ve reached your preservation age, but are still working and beginning a ‘transition to retirement’ income stream
  • you’re aged 65 (even if you’ve not retired)

Are there special circumstances when I can access my super to pay off my mortgage before I reach my preservation age?

Yes, you can access your super before your preservation age in special circumstances.  These are:

  • early release due to COVID-19 provisions
  • compassionate grounds
  • severe financial hardship
  • a terminal medical condition
  • temporary or permanent incapacity
  • you’re a temporary resident departing Australia

The compassionate grounds provision allows you to access your superannuation to prevent you from losing your home.  If you are experiencing mortgage stress and are in danger of losing your home, you may be able to access your super on compassionate grounds to pay off your mortgage.

What are the restrictions for using my super to pay off my mortgage?

Age is the greatest restriction, because you can’t withdraw your super before your preservation age unless there are exceptional circumstances, as detailed above. 

You should also think about Australia’s taxation laws if you’re above your preservation age, but below the age of 65 and still working.  In these circumstances, if you do access your superannuation in a lump sum to pay off your mortgage, you may have to pay tax on it, which would reduce the benefit of accessing your super to pay off your mortgage.

There are no other restrictions to prohibit you from taking a lump sum out of your super to pay off your mortgage, but you should seek professional financial advice before making the decision to do so.  Use Savvy’s lump sum calculator to work out how much interest you’ll save if you do pay off your mortgage this way.

What are my alternatives to using my super to pay off my mortgage?

If you’re in your 50’s or 60’s and approaching retirement age, your alternatives to using your super to pay off your mortgage include:

  • increasing the frequency of your mortgage repayments so you’re able to pay off your mortgage before you retire (make mortgage repayments more often, such as fortnightly instead of monthly)
  • increasing the size of your repayments to pay your mortgage off more quickly (use this handy extra repayment calculator to find out how much time you’ll save by increasing your mortgage repayments)
  • using accumulated savings you may have to pay off your home loan in one lump sum
  • selling other assets to pay off your mortgage (for instance, investment shares, jewellery, a boat or caravan you may own)

Frequently asked questions about using super to pay off your mortgage

What is the asset threshold to receive the aged pension?

The asset thresholds to receive the aged pension are as follows:

  • If you’re single, $270,500 (if you’re a homeowner) or $487,000 (if you aren’t)
  • If you’re part of a couple, $405,000 (if you’re homeowners) or $621,500 (if you aren’t)
Will my aged pension increase if I use some of my super to pay off my mortgage?

Probably not, but this will entirely depend on your assets and whether you are eligible to receive a part or full aged pension.  As of 1st July 2021, part pensions are cancelled when the assets you own are over the cut-off point for your particular situation, such as whether you’re a single person or part of a couple.  The aged pension assets test includes all assets you own, including your superannuation but excluding your home.

Does my super earn more than my home loan costs me in interest?

That may well be the case depending on what your home loan interest rate is and what type of investment option you have with your superannuation fund.  However, with some super funds delivering two-digit returns in 2021, and home loan interest rates at an all-time low at the same time, it’s most likely that your super would have earned you more than your home loan interest cost in that year.

Am I better off making concessional contributions to my super or paying off my mortgage with my super?

This is a complex question which a financial planner can best advise you on.  It’ll depend on whether you have a sufficient amount in your super account to fund your retirement, whether you’ll have an income after retirement, whether you have an emotional need to pay off your mortgage before retirement and how long you intend to continue working for.