Mortgage vs super: Where should you put your extra money?

Choosing whether to direct your spare cash into your mortgage or your super can be a tricky balancing act—especially when both options can meaningfully improve your long-term finances. By weighing up factors like interest rates, tax benefits and your retirement goals, you can decide which path is more likely to deliver the biggest boost to your overall wealth.

But which offers the greater ROI? Canstar’s research team has crunched the numbers for both lump sum and monthly contributions to give you an idea of what the impact to your bottom line could be.

Adding an extra $200 a month

Deciding whether to put an extra $200 a month into your super or towards your mortgage can have a surprisingly different impact on your long-term wealth. As the tables below show, a 35-year-old who boosted their super by $200 a month would finish with $103,600 more at age 60 than if they relied solely on employer contributions, while putting that same amount into their mortgage would improve their equity by $47,313.

Based on these projections, super comes out ahead for this scenario—all figures shown in today’s dollars.

Superannuation balance projection extra ongoing after-tax contribution of $200 per month

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Source: www.canstar.com.au. Prepared on 01/12/2025. See notes for all assumptions. All information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall or rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.

Impact of extra $200 contributed to monthly mortgage repayment

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Source: www.canstar.com.au – Prepared on 01/12/2025. See notes for all assumptions.

Adding a lump sum of $2,500

If that same 35-year-old added a lump sum of $2,500 to their super they would have boosted their super by $7,000 by age 60. But if they had added it to their home loan they would have increased the value of their equity by $3,409. As in the previous example adding money to super has produced a stronger result.

Superannuation balance projection – extra after-tax lump sum contribution of $2,500

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Source: www.canstar.com.au. Prepared on 01/12/2025. See notes for all assumptions. All information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall or rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.

Impact of $2500 lump sum contributed to monthly mortgage repayment

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Source: www.canstar.com.au – Prepared on 01/12/2025. See notes for all assumptions.

As the examples show, with investment returns from super being significantly higher than interest rates, there is certainly a case for tipping more money into your super than your mortgage.

But it’s not necessarily that simple and there is no one-size-fits-all answer to this question. Both options have their pros and cons and a lot depends on your personal situation. Here are some of the things to consider when weighing up where to put your extra cash.

Paying extra into your mortgage

Pros

• By making extra repayments on your home loan you could potentially save thousands in interest over the lifetime of the loan, resulting in paying off your mortgage much faster.

• You may also still be able to access your money if your home loan has a redraw facility or offset account attached to it. If you are using redraw make sure you find out if any fees apply and if there is a minimum or maximum amount you can redraw. It’s also worth noting that if your circumstances change, your bank can shut down your redraw.

Cons

• Unlike with super there are no tax benefits that come with adding money into your mortgage.

Paying extra into your super

Pros

• Making extra contributions to your super will mean you will have more money to access at retirement.

• There may be tax benefits that come with making additional contributions to your super. For example, any before-tax money that you put into super is taxed at15% (as opposed to your marginal tax rate). You may also be able to claim a tax deduction if you make an after-tax contribution.

Cons

• You generally won’t be able to access your money until you meet a  ‘condition of release’. These conditions include:

• • Reaching the preservation age (60, if born after June 30 1964) and retiring

• • Reaching the preservation age and start a ‘transition to retirement income stream’

• • Turning 65 years old.

Things to consider when deciding where to put your money

Your age

Paying off your mortgage earlier can free up cash later, allowing you to boost your super contributions once your mortgage payments are reduced and your income has increased, director of WLM Financial, Laura Menschik, told Canstar. “Younger people are usually more likely to have increased expenditure over the years and may not want money tied up in super, while older people may be in a better financial position to have the surplus cash to top up super before retirement,” she explained.

How much you’ve already paid off your loan

Jonathan Philpot, wealth management partner at HLB Mann Judd, told Canstar that “generally people should focus on reducing their mortgage, particularly in the first few years”. When you first take out a loan, interest accounts for a larger proportion of your repayment than principal, so the more you pay off earlier, the less interest you’ll pay over the life of the loan

“A good goal to aim for is reducing the mortgage level to 50% of the home value before considering any other strategies with your money,” said Mr Philpot, although he acknowledged this approach may not be for everyone.

When you’ll need access to your money

If your circumstances change and you need the money that you’ve contributed to super, you may not be able to access it unless you meet certain conditions, explained Ms Menschik. “If someone requires money before retirement, paying off the mortgage may be a better option, especially if there is a redraw facility, offset account or access to equity in the property,” she said.

Mr Philpot agreed. “Having an offset account attached to the home loan allows all savings to sit within the offset account, thus reducing the interest on the home loan but still providing the flexibility to be able to use funds for holidays and school fees, etcetera as they arise,” he said.

Interest rates

When mortgage interest rates are low, the cost of carrying debt is relatively small. Putting extra money into your super could grow your wealth faster if your expected investment returns are higher than your mortgage rate. On the other hand, when interest rates are high, paying down your mortgage offers a guaranteed return by reducing debt, which can make mortgage repayments a more appealing option than super contributions.

What makes you more comfortable

Do you like the idea of owning your home outright before you move on to other investments? “Sometimes it comes down to a personal comfort zone and the satisfaction of knowing you own your own property outright. This can then be a building block to help finance other investments,” said Ms Menschik.

Alternatively, you may prefer to put extra money into super, which can help grow your retirement savings over the long term and make it easier to achieve a comfortable retirement. Ultimately, the best approach depends on your personal goals—whether you value the security of a mortgage-free home or the potential growth of a larger super balance.

Notes

Superannuation assumptions

Scenario begins at the start of the 2025-26 financial year and is based on a 35 year old with a starting balance of $80,886 (per APRA Quarterly Superannuation Industry Publication), starting gross annual income of $100,492 (per ABS Characteristics of Employment – median full-time employee earnings). SG Contribution amounts per Government announced rates, and along with the salary sacrifice and monthly after-tax amounts, are assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Investment returns based on average 7-year annualised investment returns net of fees for funds available for a 35 year old with growth asset allocations between 60%-80% on Canstar’s database (Oct-2025). Average life and TPD insurance premium of $286, is assumed charged at the end of each year based on default cover available for a 35 year old on Canstar’s database. Annual income, insurance premiums, salary sacrifice and extra after-tax contributions are assumed to increase with inflation each year. Inflation is assumed to be 2.5% p.a. due to the rising cost of living (CPI Inflation) plus a further 1.2% p.a. due to the rising community living standards.

Mortgage assumptions

Mortgage calculations assume a 30 year loan term, 80% LVR and P&I repayments. Average annual property price growth based on the national average 10 year annual growth rate for houses (Cotality 2025). Inflation rate of 3.70% based on 2.5%,p.a. due to the rising cost of living (CPI Inflation) plus a further 1.2% p.a. due to the rising community living standards per Moneysmart. Interest rate based on the average of rates since September 2020 for outstanding owner occupier variable rate per RBA Lenders’ Interest Rates (September 2025). Equity at age 60 is displayed in “today’s dollars”, meaning the value is adjusted for inflation.