As a member of the sandwich generation, I’m going to guess that taking out your first home mortgage is not at the top of your mind. Rather, you might be well down the path of paying that mortgage off, or perhaps you’ve already paid it off.

However, particularly if you have an outstanding mortgage, there are a few factors that need to be considered the closer you get to retirement.

Retiring with debt … something to be avoided!

The advent of 30-year mortgages, which largely replaced 25-year mortgages in order to make the payments lower and more affordable, has led to a concerning trend for the sandwich generation. More and more people are finding themselves retiring with debt.

As I mention in my book, a home mortgage isn’t, in itself, a ‘bad debt’, given it puts a roof over your head and supports an asset that, hopefully, is gaining value over time.

However, as a general rule, if you are in your 40s or 50s and still maintain a mortgage on your home, the aim should be to have this paid off before you retire. If at all possible, you want to avoid counting on your superannuation savings to pay down that debt. To do so would be to enter your retirement from well behind the starting line.

To work out what adjustments you need to make to your current repayments in order to pay off your loan, use a mortgage calculator, like the one in our resource page or on the ASIC Moneysmart website. If increasing your repayments by, say, 30% is too much at the moment, start with an extra 10% or 20%. Pay whatever you can afford. At least if you do the calculation you know what you’re up against and have something to aim for.

Here are two other helpful hints for reducing your mortgage are:

  • If there is an interest rate cut and your lender reduces your required repayments, maintain your repayments at the previous level. It may be a small difference, but it is extra principal coming off your loan each time.
  • Consider shifting to fortnightly rather than monthly repayments, especially if that is the way your salary is paid. Paying half the monthly rate every two weeks effectively adds an additional monthly payment into each year (as there are 26 fortnights in a year).

At the end of the day, it’s important to remember the basis for any good long-term financial plan is to retire comfortably. That should mean retiring with either no debt or debt only against investment assets such as shares or property – debts that are worth more than the loan and that provide an income through distributions or rent. Ideally that income will pay off all, or the majority, of the loan for you.

Making sure you’re getting the best deal Regardless of the status of your current mortgage, here’s an important tip: take the time to review your mortgage every three or four years. Contact your bank or mortgage broker and ask whether your current arrangement is the best they can do for you. If not, be willing to refinance with another lender. You would be surprised how few people do this, and how often a bank will review a loan in your favour if you have been banking with them for a while.


Article by Marc Bineham – Money coach, speaker and award-winning author of The Money Sandwich