Money

Don't skewer super for a house

Noel Whittaker
Noel Whittaker

BUYING that first home is never easy, and ideas to help young people get ahead  are floated continually.  The latest one is changing the rules to allow young people to use their superannuation as house deposit.

Apart from driving up house prices the plan has two other major faults - it ignores the true cost of home ownership and the real purpose of superannuation.

First, there is a hefty margin between the costs of renting and owning. Take a house worth $400 000 that rents at $400 a week. The tenant gets occupancy for a total yearly cost of  $20,800 - in contrast, a mortgage of $350,000 will cost at least $24,500 a year in interest alone. Then add at least $3000 a year for rates and maintenance. This means that the tenant is almost $7000 a year better off than the owner.

Obviously renters who cannot save, could end up with serious financial problems if they somehow wrangle enough money for a home deposit.

Superannuation has one major goal - to provide people with a retirement income so they won't be living on the streets in their old age when the government runs out of welfare money. How much you have when you retire depends on three factors, The amount contributed, the rate earned, and the time the money was in there. Reduce any of these and you reduce the final payout.

Suppose two people invest $3000 a year for 40 years. If one earns five percent p.a. and the other earns 10 percent p.a, the end benefits are $400 000 and $1.6 million respectively. Just doubling the rate of return quadruples the end benefit. 

This example shows that that the primary objective of anybody with superannuation is to achieve the highest returns possible - you could never achieve this if you borrow money from your superannuation account and use it to reduce your home loan.

Noel Whittaker is a co-founder of Whittaker Macnaught Pty Ltd.  His advice is general in nature and readers should seek their own professional advice before making any financial decisions.  His email is noelwhit@gmail.com

Topics:  first home buyers interest rates mortgage noel whittaker superannuation


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Green group calls for cap on Noosa daytrippers

CAP PLAN: Holiday crowds flock to Noosa Main Beach - day tripping may face a limit.

Residents interests 'pushed to one side' during peak season

Everyone's loving new Eumundi lager

Chuck was thrilled to bring one of the first kegs to the Imperial Hotel to try.

Deputy PM and locals try new Eumundi brew at private tasting

Noosa a top place to get work

Signs of better things

Local Partners

No bull, Dan's son a hero in shark attack

NOOSA paramedic Dan Moore's 15-year-old son Max paddled through bloodied water on Bali's west coast to push his father to shore.

Lanza Sings Again recreates tenor's musical memories

The Lanza Sings Again cast: (from top) Chris McKenna, Alison Jones and Roy Best.

Relive the musical memories of tenor Mario Lanza in new show

Feel grapes squish between your toes at Stomp 2017

The Flame Hill Grape Stomp is fun for all ages.

Flame Hill Vineyard at Montville has announced the Stomp 2017 date

Noll meltdown won't affect Gympie Oz Day concert

Shannon Noll

Photo Contributed

Shannon Noll is still expected to perform in Gympie next Thursday

50 Shades actress on why she hates the film

Dornan and Johnson’s frequent sex scenes were ‘awkward’ to film. Picture: SuppliedSource:Supplied

Jamie Dornan doesn’t blame you for hating 50 Shades

Chris Hemsworth’s X-rated compliment to former co-star

Australian actor Chris Hemsworth poses on the red carpet for the European premiere of the film 'Avengers: Age of Ultron' in London on April 21, 2015.

THOR star once paid former Home and Away actress a lewd compliment.

'I can't keep my mouth shut any longer'

Singer George Michael.

George Michael’s cousin blasts singer’s boyfriend Fadi Fawaz.

Lanza Sings Again recreates tenor's musical memories

The Lanza Sings Again cast: (from top) Chris McKenna, Alison Jones and Roy Best.

Relive the musical memories of tenor Mario Lanza in new show

Feel grapes squish between your toes at Stomp 2017

The Flame Hill Grape Stomp is fun for all ages.

Flame Hill Vineyard at Montville has announced the Stomp 2017 date

Fresh faces: NCIS gets a shake up with new cast members

The new cast of NCIS, from left, Rocky Carroll, Pauley Perrette, Sean Murray, David McCallum, Brian Dietzen, Wilmer Valderrama, Emily Wickersham, Mark Harmon, Duane Henry and Jennifer Esposito.

THREE new characters join naval drama for season 14.

Historical home leaves family's hands after 75 years

SALE CONFIRMED: The Gympie Regional   Realty team which sold the Ramsey property are (back) Mel Gastigar, Dorothy Palmer and Margaret Cochrane, with (front) home seller Terri-Jayne Ramsey.

Ramsey family played a huge role in Gympie's growth.

What a year 2016 proved to be

Entrance Island, Birtinya

Get the inside info from the agents themselves

Hundreds of open homes on the Coast this weekend

The late Cliff Hargreaves' house at Currimundi is up for sale for the first time since 1968.

It's the time to sell, and a great weekend for stickybeaking.

REVEALED: What Coast wants in an international airport

Sunshine Coast business people share their views on what's needed

Time for a cool change

43 Eckersley Ave, Buderim.

Family home goes to the auction floor

Ready to SELL your property?

Post Your Ad Here!