Don’t rush to pay off mort­gage

Money Magazine Australia - - ASK PAUL -

Q

We are par­ents of two young chil­dren (aged two and five). We are 37 and 41 and owe $110,000 on our Syd­ney home, which is worth about $950,000. My hus­band earns about $2000 a week and I will re­turn to part-time work at the be­gin­ning of 2019, earn­ing about $400 a week. Be­sides su­per (com­bined to­tal $350,000) we have no other in­vest­ments.

We want to pre­pare for the fu­ture (look­ing af­ter our two daugh­ters and our re­tire­ment). Con­sid­er­ing our age, in­come and fam­ily sta­tus, should we look at an in­vest­ment prop­erty, shares, or su­per, or fo­cus on pay­ing off our mort­gage?

You are in a ter­rific sit­u­a­tion for peo­ple of your youth­ful age. You may laugh at this but at 63 you sound re­ally young to me!

Nor­mally I am su­per keen on peo­ple get­ting rid of their mort­gage, and in your case that re­mains the safest thing to do. But you are down to the last $110,000 of debt and you have a stack of eq­uity in your home. Your hus­band is a high-in­come earner and you are go­ing back to work. So in your case I am pretty re­laxed about you pay­ing off the mort­gage over time and build­ing wealth out­side your home.

First, I would think your hus­band should be max­ing out his con­ces­sion­ary su­per con­tri­bu­tions to the full $25,000pa al­lowed. Then with a weak prop­erty mar­ket in many parts of Aus­tralia, and one that in my opin­ion will get worse, it is a good time to take a leisurely look at in­vest­ment op­tions.

I am equally happy for you to build a share port­fo­lio, as de­cent shares and well-lo­cated prop­erty both tend to do well over time, so it is a bit of a per­sonal choice. My pref­er­ence is for us all to own both but you are do­ing this now with your ex­ist­ing prop­erty and a very healthy su­per balance.

If you do go the prop­erty route, please do your own re­search and don’t overgear. You are in a great po­si­tion; it would be silly to blow that by tak­ing too much risk.

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