People Are Mortgaging Their Future, For Their Mortgage
It seems that a lot of homeowners are accessing their Superannuation to try and save their homes from repossession.
Over 55% of the applications received by APRA last year for early release of Superannuation funds were for mortgage assistance. This far exceeds the second highest reason, medical treatment, which was a mere 15% if applications.
This seems like one of the worst ideas I have heard of in many years. Taking money from your retirement fund, your future, to pay debts now. And it reminds me of a married couple who are friends of mine.
About 12 months ago I helped them landscape the backyard of their home. It was the most physical labour I had done in years but it was fun (except the blisters) and by the end it looked great.
A few months later they told me they were selling up. I was a little surprised but they told me that they couldn’t afford the mortgage on the place any more. They were a two-income family (they had a little girl as well) but the wife had lost her job after her company re-shuffled. And the mortgage on their 2-bedroom house (with a fabulously landscaped backyard) was too much for just one income.
So they had decided to sell it and buy a (much cheaper) unit.
I was really proud of them for making that decision. And it is a lesson that others, including these people who are raiding their super, should learn. If you are having difficulties financially you need to come up with various ways of dealing with it and make some hard decisions.
I am sure it wasn’t easy for my friends to move into a smaller place (especially from a house into a unit), but they had to make a hard choice. And dipping into their retirement wasn’t one they wanted to make.
The end of the article that I linked to has a chilling last line that was quoted from David Tennant, head of Care, a financial counselling service:
My experience . . . is that all it does is shift the date on which foreclosure takes place.
Do you anyone you know thinking about raiding their superannuation?
Image credit: itjournalist
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