Don’t touch savings, and shop for a cheaper loan
QHi Paul. I have found myself out of a job due to budget cuts. I have been working on a casual basis the past 2½ years for the one company and qualify for JobKeeper. I am turning 58, which is my preservation age. I have $840,000 in AMP SignatureSuper, of which $45,000 is non-preserved and unrestricted. We owe $280,000 on our house and are $117,000 in advance, with monthly repayments of $2000 on a rate of 3.84%. My wife does not work and we have three school-age kids at home.
Should I supplement my JobKeeper by drawing on the $117,000 or should I use the $45,000 in my super non-preserved and put it in a mortgage offset account with my credit union?
Ray, I am really against people dipping into super. It is a high-performing asset over the longer term in a low-tax environment. My advice is to leave it alone until you really need it in later life. My first thought would be to have a chat to your lender because 3.84% is not a great rate. Don’t do this until you check out a couple of refinancing options.
I appreciate you are on JobKeeper at the moment, but with a mortgage of $280,000, a big pot of super and $117,000 in savings, I suspect you would be very attractive to a new lender. I think you’ll find rates under 3%. Take that back to your lender and negotiate a better interest rate. Also, $2000 a month on your mortgage, or $24,000 a year, is a big repayment. Equally, you could discuss lowering this until your job returns or you find new work as the economy recovers.
My view is to chase a better interest rate and a lower loan repayment schedule. Then, yes, I would dip into the $117,000 in savings. While you are at it, check the returns from your super fund and also the fees. You have a very big super balance and you need low fees and high returns, not high fees and low returns. Also ensure you do not have too much or too little insurance cover in your fund.
I am always looking at the returns on different assets and also the costs involved. I suspect your $117,000 savings are earning under 1%, unless in a mortgage offset account, where they should effectively earn the interest rate on your mortgage. With good, low-cost super funds delivering, over time, much higher returns that this, I am loath to see you access super at this stage.