Older Aussies are drowning in mortgage debt: how to stay afloat for retirement

A growing number of older Aussies are taking their mortgage into retirement, with new research showing home loan debt among those over 55 has skyrocketed by 600% over the last three decades.  

The study by the Australian Housing and Urban Research Institute (AHURI) found rising house prices over the years, alongside slower wage growth, have left many retirees struggling to keep their heads above mortgage debt. 

According to the study, average real mortgage debt among over-55s surged from $27,000 to over $185,000 between 1987 and 2015. Meanwhile, their mortgage-debt-to-income ratio tripled from 71% to 211% during the same time period. 

The study also revealed home loan repayments were the single largest expense eating into the budgets of older Aussies, taking up one-third of their spending. 

And that’s left some retirees without enough funds to cover basic household costs. Nearly 8% of older Aussies with a mortgage reported being unable to pay their utility bills on time between 2006 to 2016, compared to only about 3% of outright homeowners. 

Mozo’s Property Expert Steve Jovcevski said many Aussies aren’t preparing for those later years of life well enough and end up being “trapped into their mortgages” once they hit retirement. 

“A lot of people expect they’ll be able to pay off their property with their super. But you still need that super to supplement your income going forward, especially if you’re hoping to have a better quality retirement and don’t want to be stuck relying on the pension,” Jovcevski said. 

“So, by the time you’ve retired, you really need to have paid off your home loan.”  

How to pay off your property before you retire 

Here are three of Jovcevski’s tips to make sure you’re well on your way to repaying your mortgage before retirement: 

  • Shop around for a refinancing deal: With some home loan rates recently dropping below 3%, refinancing could be a great way to get your hands on a better value mortgage. Your first point of call should be to revisit your current bank and haggle for a lower rate, but make sure you’re also keeping your eyes open for other great deals in the market. By refinancing, you could lower your monthly repayments and save loads on interest costs! 
  • Devise a decade-long savings plan: Already in your 50s? Then it’s time to sit down, grab a cuppa and map out exactly how you’ll pay off your property over the next 10 years. This could involve cutting back on your spending as much as possible while you’re still earning a salary so you can focus more of your income on paying down your home loan.
  • Talk to an accountant: Need help with planning ahead? It’s a good idea to have a conversation with your accountant about the most tax effective way to pay off your property while still having some money left in super when you retire. 

For older Aussies in a tight financial bind, Jovcevski recommended having an exit strategy, whether that’s downsizing by selling your property and moving into a smaller apartment, or opting for the government’s Pension Loan Scheme. This scheme is a ‘reverse mortgage’ that enables pensioners and part-pensioners to convert the equity (or value) of their property into loan cash, which can then be used as a form of income. 

Still got some time before retirement? Head over to our refinance home loans comparison table to get started on finding a better deal today.