How will you retire if you still have a
mortgage to pay?
I recently sat down with a client of mine, Andrea, who is 49 years of age and had a 28 year home loan with the CBA. We started talking over a cup of coffee and she was telling me that she was starting to become stressed about how she would never be able to retire at the age of 65, as she only has 16 years left in the workforce BUT she has 28 years left on her home loan. The maths simply didn’t work, it didn’t add up for her and she didn’t see any possible solutions.
She was frustrated as she’d been chasing the cheapest rate loan for the past 10+ years and she’d been paying so much towards her mortgage every month yet it never seemed to move down.
She certainly didn’t know that the banks design loans to keep people in debt for as long as possible, trying to make as much profit from their customers over the longest time.
Their goal is simply to get money out of her pocket and put it into their pockets!
She was searching for an alternative way to own her home faster as she wasn’t confident that doing the same thing she’d always done will give her a different result…
I wanted to teach her that having money sitting in her savings account was the absolute worst thing she could do with her income, as it works for the bank, not her. The banks pay her 0.01% interest on that money, whereas it should be sitting in her home loan account where it is earning her 5% because it is saving her 5% in interest.
By simply reversing the flow of her money, she could actually get her income to work for her instead of the bank. That would mean her loan would start reducing a lot faster than the $3,455 per year she was currently taking off her CBA loan.
With her income being banked into her home loan and her living expenses coming out each month, we projected she will be debt free and OWN her home in 13 years. Which would mean she would be 62 years old and able to retire WITHOUT having to use her super fund to pay off the home loan. By having all of her superannuation intact, she would then be able to live comfortably in retirement rather than look to the pension, which is only $245 per week.
There are so many Australians that are in the predicament of potentially having to continue working because they still have a mortgage at the age of 65.
The sooner you start paying down your home loan, the sooner you can retire. It must be one of your key focuses financially: a little bit of short term pain for some long term gain.
Imagine your life without a mortgage each month, all your income to do whatever you want, whenever you want. That is called Financial Security – and that’s the name of the game!