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Super vs Mortgage: Where to Invest My Extra Savings?

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June 23, 2023

Investing is essential for financial planning, and deciding mortgage vs superannuation funds can be tricky. Superannuation funds are typically a longer-term investment, while mortgages provide short-term gains. It is necessary to assess your financial goals, risk tolerance, and time frame before deciding which option best suits your needs. 

With SMSF loans, borrowers can use their self-managed super fund (SMSF) to purchase an investment property and enjoy tax benefits while maintaining control over their finances.  To ensure compliance with the regulations, they provide greater transparency and accountability than traditional mortgages, which require regular reporting of the fund’s performance.

These professionals can provide valuable guidance and support to help you maximise the benefits of your SMSF and achieve your long-term financial objectives. It is where the expertise of SMSF accountants comes into play. SMSF tax returns in Perth, it’s crucial to work with experienced accountants who have a deep understanding of the regulations and requirements involved.  

Mortgage Interest vs Super Fund Returns

Understanding Superannuation

Superannuation is a long-term savings plan designed to provide financial support in retirement. It is a tax-effective way to save for retirement, as contributions are taxed at a lower rate than regular income. Understanding superannuation is essential when deciding where to invest your extra savings.

Superannuation funds invest your money in a range of assets, such as shares, property, and fixed-interest investments, intending to generate returns over the long term. The money invested in superannuation is generally not accessible until retirement age, but there are some exceptions, such as financial hardship or severe illness. 

Advantages of Superannuation

  • One of the advantages of investing in superannuation is the tax benefits it provides. 
  • Superannuation contributions are taxed at a lower rate than other forms of investment, which means you get to keep more of your money.
  • Any earnings on your superannuation investments are taxed at a lower rate. It can make a significant difference over the long term, especially if you start investing early. 
  • Another advantage of superannuation is that it is a long-term investment. By investing in superannuation you are putting your money to work for you over a period, which can lead to greater returns.
  • Superannuation is a great way to save for retirement, which is something that many people overlook. 

Disadvantages of Superannuation

  • One of the main drawbacks of superannuation is no control over where your money is financed. Your super fund may invest your money in assets that don’t align with your values or may not perform. 
  • Additionally, superannuation is subject to government regulations and changes, which can impact the money you receive. 
  • Another disadvantage is the limited access to your funds before retirement age, which can be frustrating if you need the money for unexpected expenses or emergencies. 
  • Finally, superannuation fees can eat into your returns over time, reducing the amount available for retirement. 

Understanding Mortgages

A mortgage is a loan used to purchase a property, typically paid off for 15 to 30 years. The interest rate on a mortgage can vary based on factors such as credit score and the current market conditions. Additionally, it’s essential to understand the different types of mortgages available, such as fixed-rate and adjustable-rate mortgages. With a fixed-rate mortgage, the interest rate stays the same for the life of the loan, while an adjustable-rate mortgage can fluctuate based on market conditions. Understanding mortgages can help you make informed decisions about investing your extra savings and achieving financial stability. Regular SMSF compliance audits in Perth can ensure that your fund remains compliant and your investments with your long-term financial goals.

Advantages of Mortgages

  • One of the advantages of mortgages is that they allow you to invest in real estate without paying the price upfront. It means you can use your extra savings to make a down payment and then pay off the rest over time. 
  • Additionally, mortgage payments are often tax-deductible, which can help you save money on your taxes each year. 
  • Another advantage of mortgages is that they can help you establish a good credit history, which can be for future loans and credit applications. While there are risks involved with taking out a mortgage, such as the possibility of defaulting on payments or losing your home if you can’t keep up with payments, the advantages can be significant for those who can manage their finances responsibly. 

Disadvantages of Mortgages

  • Firstly, mortgages often come with high-interest rates and fees, which can add up over time and make the overall cost of the loan much higher than the original purchase price. 
  • Mortgages require a significant amount of financial commitment and responsibility. 
  • Furthermore, mortgages can limit financial flexibility, as a large portion of income may be tied up in monthly payments, leaving less room for other investments or expenses.

Comparing the Benefits of Investing in Super vs Mortgage

Comparing the Benefits of Investing in Super vs Mortgage

When investing your extra savings, there are two main options to consider super or mortgage. Both have benefits, but it depends on your financial goals and circumstances. Investing in super can provide long-term financial security for retirement, as it is a tax-effective way to save for the future.

On the other hand, investing in a mortgage can provide immediate benefits such as paying off debt and owning a valuable asset. Additionally, owning a property can provide stability and security in the long term. It’s necessary to weigh the benefits of each option and consider your financial situation before making a decision. 

If you have a high level of debt or are approaching retirement age, investing in super may be the better option. Ultimately, seeking a professional super vs mortgage advisor is necessary to make an informed decision and ensure your investments align with your overall financial goals.

Factors to consider

By taking advantage of an SMSF loan, you’ll have greater control over your investment strategy while enjoying tax benefits and potential long-term gains. SMSF services include setting up and managing the SMSF, preparing financial statements and tax returns, and providing investment advice.

1. Fees

Fees associated with super funds can vary widely depending on the provider, and while some funds have high costs, others can be much lower. These fees can impact your returns over time, so it’s essential to do your research and compare different options. Selecting an option with lower prices can maximize your savings over the long term.

2. Interest rates

High-interest rates can result in larger mortgage payments and less disposable income. On the other hand, a high-interest savings account associated with superannuation can offer significant returns over the long term. Work with experienced SMSF accountants who can guide you in structuring and managing your fund.

3. Level of flexibility

When deciding between investing in super or paying off a mortgage, the level of flexibility offered by each option is a consideration. Super funds can propose limited flexibility in investment options and access to funds, which may not be for those seeking greater control over their investments. On the other hand, paying off a mortgage can free up cash flow and provide greater financial flexibility in the short term but may limit long-term investment potential. 

Also Read: 10 Basic Tips To Manage SMSF Fund


In conclusion, deciding between investing in a super vs mortgage fund is a personal choice that depends on individual circumstances and goals. It’s necessary to consider your age, retirement goals, and financial situation. Additionally, seeking professional financial advice can help you make an informed decision. 

When it comes to investing your extra savings, it can be overwhelming to decide where to put your money. One option is to invest in the stock market, specifically in superannuation funds. In this blog, we will explore the pros and cons of investing in superannuation and mortgages and provide insights to help you decide where to invest your extra savings. 

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