Pay Off the Mortgage, Put More Into Super or Invest?

“Should we pay off the mortgage, put more into super or invest?” It’s the question every financial planner in Australia hears most weeks, usually right after a bonus or a pay rise.

On episode 6 of our podcast, Building What Matters, I put it to two of our Senior Financial Planners. Sam Jewell argued for the mortgage, Rebecca Pritchard argued for investing, and I argued, vehemently, for super. Watch the episode below, or read on for the short version.

Spoiler: all three play a part in most plans. The real question is the mix, and that depends on something the numbers can’t tell you: when you’ll need the money.

Start with when you’ll need the money

Before we compare anything, we look at your goals for the next ten years. School fees, a renovation, one of you stepping back from work, a bigger home. Money in super is generally locked away until you retire after 60, or turn 65. Money in your offset account is there tomorrow.

If your goals need cash before 60, that changes the answer. A strategy that looks great on paper but leaves you short when the school fees land isn’t a good strategy.

Get the basics in place first

We always build the foundation first: cash flow, a buffer and the right insurance. Then wealth. If you don’t have at least three months of spending sitting in your offset, that’s where spare money goes first. It saves the same interest as paying down the loan, and you can still get to it.

The case for the mortgage

Sam’s case starts with structure. “A lot of people get on autopilot,” he said. “They might refinance every couple of years, they’re resetting home loan terms back to 30 years every couple of years, and before you know it, you’re in your mid-50s and you’ve still got a big mortgage.”

There are two simple fixes. When you refinance, you can usually keep your existing loan term instead of starting a fresh 30 years. And every dollar in an offset or redraw cuts the interest you pay. That’s a guaranteed return equal to your home loan rate, and it shortens the loan even if the term does reset.

Offset or redraw?

Both save you the same interest. The difference is how easy the money is to get to.

• Offset account. Works like an everyday bank account. The money is there whenever you need it, which makes it the right home for your buffer. It also tests your willpower.
• Redraw. Extra repayments you can take back out, usually with an extra step or two. That bit of friction helps if money tends to go walkabout.

On the episode I put it to Sam like this. An offset is the Tim Tams in the fridge: my four-year-old will always find them. Redraw is the Tim Tams on top of the fridge. Same biscuits, a bit more effort to reach. “Exactly right,” he said.

One catch. If there’s a chance your home becomes an investment property one day, an offset is usually cleaner for tax. Money taken out of redraw counts as new borrowing, so how you use it affects what’s deductible. Get advice before you rely on redraw in that situation.

The case for super

My argument is simple. Money going into super before tax beats money going into the mortgage after tax. As I said on the episode, “my marginal tax rate is higher than the current super tax rate and has been since Moses was a boy.”

Take $10,000 of your pre-tax salary.

• Take it as salary. If you earn over $190,000, you lose 47% to tax and the Medicare levy. About $5,300 lands in your offset.
• Salary sacrifice it into super. Contributions are generally taxed at 15%, so $8,500 goes into super.

That’s a 60% head start before either option has earned a cent. Now say both earn 6% a year for 20 years. We’ve used the same rate for both to keep it fair. The offset saves you 6% on a 6% loan, guaranteed. Super returns go up and down.

	Into the offset	Into super
Today	$5,300	$8,500
After 20 years at 6%	About $17,000	About $27,300

The usual knock on super is access. But Sam made a good point here. Plenty of people now take on a 30-year mortgage in their 40s. If you plan to stop work in your 60s, you can build super at the lower tax rate now and use a lump sum to clear the loan once you retire. It has to be a deliberate plan, though. Heading towards 65 with a mortgage on purpose is a big shift for most people.

The catches for high earners

• The cap. Concessional contributions are capped at $32,500 for 2026-27, and that includes your employer’s 12%. On a $250,000 salary, your employer has already used about $30,000 of it. Check before you add more.
• Carry-forward. If your super balance was under $500,000 at the previous 30 June, you can use unused cap amounts from the last five years. That’s often where the real room is.
• Division 293. If your income plus concessional contributions is over $250,000, those contributions are taxed at 30%, not 15%. The $8,500 becomes $7,000. Super still starts ahead, but by less. Here’s how Division 293 works.
• Your tax bracket. Between $135,000 and $190,000, your marginal rate is 37% plus the Medicare levy, so you’d keep about $6,100 of the $10,000 as salary. Super still starts ahead, by less.

The case for investing

Rebecca had two reasons, one mathematical and one behavioural.

The maths first. Over 10 to 15 years or more, you’d expect a diversified portfolio to return more than your mortgage rate. Not every year, and it gets uncomfortable in the short term. “If you’re looking over a 10, 15, 20-year landscape, it’s pretty strong,” she said.

The behavioural reason is the one I like most. Money sitting in an offset or a bank account has a way of going walkabout. Once it’s invested, it’s a bit harder to spend.

Where you invest matters. Recent fund collapses are a reminder to stick with well-known, diversified investments you can sell easily, not something obscure, and to keep your buffer in cash. Income and gains outside super are taxed at your marginal rate, with a discount on gains held for more than 12 months, so for high earners the split between super and investing matters. Here’s how our wealth management advice works.

When the mortgage is the better call

• You don’t have a buffer yet. Build that first.
• You’ll need the money before 60. If your goals need it sooner, the offset keeps it within reach.
• You have more expensive debt. Credit cards and car loans come first, every time.
• Your timeframe is short. A shorter timeframe makes investing riskier. The offset is a guaranteed return.
• The debt keeps you up at night. Behaviour matters. A plan you’ll stick to beats a slightly better one you won’t.

How we work out the mix

In our review meetings we build a lifetime cash flow. It maps the big milestones: childcare peaking, school fees, the mortgage clearing, retirement. It shows the pressure points decades out, so we can make calm decisions now.

As Sam put it, “we might put a little bit less into superannuation for a few years because we know that we can make it up in our mid-40s and 50s.”

Rebecca’s view is that it changes how a 30-year loan feels. “Just because you’re signing 30 years doesn’t mean it’s going to take you 30 years.” With extra repayments, investing, super or a mix of all three, you can see whether it’s really 17 years or 23. “That 30-year loan term actually becomes a bit arbitrary, because that’s just what the bank is saying. Then you’ve got your own plan.”

And if you’re stretching for a bigger home, Sam’s test is a good one. Will it stop you sending the kids to the school you want? Stop the annual holiday? If the answer is yes to any of those, have another think.

For most families, it’s all three

In practice, most of our clients do some of each. A healthy buffer in the offset, salary sacrifice up to an amount that suits their goals, and investing for the goals that land before retirement. The right mix changes as the kids get older and the mortgage shrinks, so we review it every year.

If you want the behaviour side of super, read my post on salary sacrificing into super. If you’re not sure you’re on track at all, start with how much super you actually need to retire.

Frequently asked questions

Is an offset account better than redraw?

Both save the same interest. An offset is easier to get to, so it’s better for your buffer. Redraw adds friction, which helps if you tend to spend what’s available. If your home might become an investment property later, an offset is usually cleaner for tax.

Is it better to pay off the mortgage or invest?

Over long periods, a diversified portfolio is expected to beat a typical mortgage rate, but not every year. Paying down the mortgage is a guaranteed return. It comes down to your timeframe, your buffer and how you’d feel in a bad year.

Should I salary sacrifice or pay off my mortgage?

For high earners, salary sacrifice usually starts ahead because of the tax difference. But the money is locked away until you retire, so it only makes sense for money you won’t need before then.

Where to start

1. Write down what you’ll need money for in the next ten years, and when.
2. Check your buffer. Is there at least three months of spending in your offset?
3. Check how much has gone into super this financial year, including your employer’s contributions.
4. Book an intro call and we’ll work out the right mix with you.

You can also read more about our super advice and how we approach debt management. Helping you say yes to a future you are proud of starts with knowing where you’re headed.

This article is general information only. It doesn’t take into account your personal circumstances, and it isn’t personal tax or financial advice. Super and tax rules change, so check current rules or speak with a qualified adviser before acting.

This article was written by Matt Hale. AI helped tidy and review it, and our team checked it before publishing.