Can you use super to pay your mortgage?

It is possible to use the money in your superannuation fund to help cover the cost of your mortgage in certain circumstances, such as if you’re retiring or are in financial hardship. However, accessing your super fund early can make a big difference to your retirement lifestyle. 

Can you use super to pay your mortgage when you retire?

Superannuation in Australia is intended to be accessed once you reach your preservation age and retire from the workforce. If you satisfy the conditions set by the Australian Taxation Office (ATO), you’ll be able to withdraw money from your super fund to use how you choose.

You could access your super as an income stream to supplement your age pension and help fund your lifestyle in retirement. However, another option could be to withdraw a chunk of your super balance to help clear outstanding debts, such as money still owing on your mortgage.

Choosing to pay your mortgage with your superannuation when you retire could affect your lifestyle and budget. On one hand, clearing your mortgage means no more repayments or interest charges. On the other, making a lump sum withdrawal to pay off your property could affect your pension, your taxes, and leave you with less cash available to earn dividends and returns from investments and help pay for your retirement lifestyle.

Because the exact effect on your finances could vary depending on your personal situation, as well as any changes to tax laws and super regulations, it’s recommended you consult a financial adviser before using your super to pay off your mortgage when you retire.

Can you access your super early to pay your mortgage?

Because superannuation in Australia is intended to help fund your retirement, Australians can only access their super early in exceptional circumstances. This can include making mortgage payments if you are in severe financial stress and are at risk of losing your house.

The maximum amount you can withdraw from your super fund cannot exceed the sum of three months’ mortgage repayments and 12 months’ interest on the mortgage. You will need an official letter issued by your lender mentioning the amount you need to pay to keep your home. The letter should also mention your name as the primary borrower, your home address, and your mortgage account number. You’ll also need to prove that you live in the home by submitting a recent utility bill. You will have to apply for the super release within 30 days of receiving this letter.

As reported by the ABC, the ATO released more than $570 million in superannuation for compassionate reasons in the 2021-2022 financial year.

According to the National Debt Helpline, any super you withdraw early to cover the cost of mortgage repayments will be taxed, and the tax amount will be deducted from the lump sum.  The tax rate varies depending on your age and other factors, though on average tax of approximately 22% will be deducted from your lump sum super withdrawal. 

It’s also important to remember that accessing your super early for any reason can have long-lasting consequences for your retirement, due to the effects of compound interest and investment returns over time. For example, RateCity research found that an Australian who withdrew $10,000 during the COVID-19 pandemic and $21,847 through the first home buyer early super access scheme could retire with up to $$69,369 less than if they’d left their super fund untouched.

Compare super funds