The Australian’s Money Cafe: Spare cash? Should you put it in super or cut the mortgage?

In this week’s The Australian’s Money Cafe we revisit one of the most popular episodes this year. Spare Cash: should you put it in super or cut the mortgage?

In this episode we looked at the specific opportunities and pitfalls for the average investor in our residential property market. Picture: Nat Thompson

Once upon a time paying off the mortgage was the outstanding financial objective of most Australians. Today mortgage rates are 3 per cent and your super is probably paying out 10 per cent a year. Guess what? Throwing spare cash at the mortgage it no longer the automatic response for the smart investor.

In this episode of The Money Cafe we rebroadcast our most popular show of the year with financial adviser Bruce Brammall.

Despite the government’s predictions of solid economic growth and contained inflation in the coming years, investors are very much aware that share markets can present sudden downturns at any time and long-term investors will always try and diversify their portfolios to hold some investment property.

In this episode we looked at the specific opportunities and pitfalls for the average investor in our residential property market.

We cover negative gearing and also the popular ‘Downsizer’ scheme which allows older Australians to sell their family home and downsize inside a special tax break where the ‘caps’ on superannuation contributions are not applied.

Keep in mind that over recent decades the average total return for houses was close to 6 per cent – so let’s call it out, 2021 with its 23 per cent lift in house prices nationwide was not typical!

However as Brammall explains, residential property investors have to cut out the noise and focus on the longer-term horizon – he believes you should not enter the investment property market unless you are prepared to stay in it for at least a decade.

As always this episode carried questions from listeners that range over subjects as diverse as the HECS dilemma, the best time to gear into shares and how to plan for a place in the country.

But it was the ‘Question of the Week’ from listener Chris who asked whether he should put some spare cash into paying off his mortgage or instead bolster his superannuation savings that makes this episode stand out and helped it on its way to becoming the most popular show of the year.

Over the summer we will be running a new summer series of the Money Cafe tagged ‘Summer ReStart’ where financial adviser James Gerrard and I will co-host three shows that introduce the investor first to the basics of investing (December 30) then to shares and funds (January 6) and finally to investment property (January 13).

We will be back with the regular show on January 20. In the meantime if you have any questions on any aspect of investing for Wealth Editor James Kirby and his guests send them to [e-mail]