Repayments from super

I am looking to buy a PPOR in Sydney but am waiting for prices to bottom. Looking at around $1.5m and I have a $0.4m deposit so would need to borrow around $1.1m.

From a servicing perspective our rental cost is about $900 a week which would cover interest costs. My partner and I save about $20k (super savings on top of this) a year and have five kids (4-14). All of the savings come from our annual bonuses as we spend all and more of our normal monthly income

However, I am on the wrong side of 55 (partner is 10 years younger) so would have limited time left in the work force.

The intention is to repay the principal on the loan from my super which I can access tax free in 4 years. The super is in cash and about $1.4m at present. If I am still working, I can pull out 10% a year for loan repayments and if not working repay the whole loan.

Question - is it feasible to get a loan on these terms?

 

See a Financial Adviser.
Areas of interest you may wish to look up prior (so that you can gauge if the Adviser you're seeing actually knows what they are talking about).

Transition to Retirement Pension
Tax on Pension Payments on a Transition to Retirement Pension between preservation age and age 60
Superannuation preservation age.

 

Even assuming you could, you would end up with a paid off ppor in a few years and no other assets. You stop working you starve.

 

I understand the super mechanisms - the question is more whether a lender would give me a loan

 

Super is growing by $60k a year and my partner would continue to work so it’s not that bad

 

Based on your spending habits, probably not (spend more than your income as you have indicated), a bonus is not certainty of income so may not be counted by all lenders.

Upon triggering a release condition, you can withdraw all of your super, whether that is wise or not is another matter to consider.

 

Thats if you dont use it to cover the ppor loan.

Partly depends on your income figures, but just on what youve said that seems like a lot of ppor for what you have and your age. A job loss or market correction would have a big impact.

If your rent barely covers interest, there are other costs, rates, repairs, insurance. Your also many years away from your kids finishing school.

 

When you say assessed, do you mean they assume ability to make repayments of $10k a month? What about an interest only loan?

 

Still be pretty close to $7,000/month just as interest.

Compare this to your current rent of half that amount.

 

Youve been renting at 3% yield. Loan assessment is at 7%+. You cant afford to buy what you are renting.

At your age without a paid off PPOR and with children 15 years away from finishing school......

 

1.1m loan at 4% is $44,000 interest a year or $850 a week - this is less than my current rent. How did you get $7,000 a month?

 

So lenders ignore the fact that you already have the money to make full principal repayment and require funds to be generated from earnings?

If that’s the case, I’ll likely have to wait to buy until I can actually get the super to which is 4 years at the earliest at $100k a year and then full access in 9 years. if I leave my job after 4 years, I would also have full access.

 

Have you really done the numbers? How long will you work for and is that realistic? You lose your job and things will get bad very very quickly.

 

Combined income would be $220k a year salary and $70k performance bonuses - about $30k of this is paid gross into super funds due to the lower tax rate. Not sure if this makes a difference?

I guess I could reduce super payments and budget tightly for six months to increase savings rate.

 

That means you are spending maybe 120k a year after tax excluding rent? Which isnt too crazy with your income and size of family, but thats not very sustainable without a job.

 

Based on apra's assessment @ 7.5% not on 4% actual.