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Super withdraw, proceed with caution

From considering whether it will negatively impact your future and if it is even worth it in the meantime, the concept of withdrawing from your superannuation for a house deposit should be tread with caution.

The Loan Company General Manager Simon Kahl said people were seeing this as a one-off opportunity to withdraw money from their superannuation tax free and make the most of stimulus packages.

“We have had several enquiries from some people regarding this as an option, but in each instance we have directed them to seek professional finance advice,” he said.

“The Australian Taxation Office has stated that Australians who have drawn down on their superannuation under the early access scheme despite not being under financial stress may face penalties of more than $12,000 for each false and misleading statement.”

Firstly recommending you see a financial adviser for any advice regarding withdrawal of superannuation, Mr Kahl said from a mortgage broking perspective it was also not a good idea.

“The superannuation withdrawal was put in place for those in hardship to be able to pay bills and debts, and cover potential shortfalls in income,” he said.

“Furthermore, lenders will generally not accept this as a source of genuine savings for any home loans and will highly scrutinise the purpose of the withdrawal making the finance approval process more difficult and cumbersome.”

Realmark North Coastal Director and Licensee Jeanette Bates said the main disadvantages were losses in retirement funds and short-term credit capabilities, as lenders viewed it as a hardship.

“It means less long-term security and lifestyle support in a life stage where you are less able to generate wealth and need stability,” she said.

“Do not do it unless you have taken strong independent advice from a financial planner or similar expert, take additional time to save a deposit and look at a savings plan and budget.”

If you do choose to withdraw for a deposit, Ms Bates said to be cautious of the type of property and location you select and to think of a long-term investment strategy.

“Super is a long-term investment and security strategy, so it is important this is maintained personally and as a national store of wealth,” she said.

“If people draw on their super, it is better they invest in a tangible asset such as property rather than consumables, however the investment in property needs to be well informed and sound.”

Mr Kahl said there were other options apart from this one, which would provide benefits for you without repercussions.

“For first homebuyers there is another super-related option for helping people buy their initial home – the First Home Super Saver Scheme, coupled with the First Home Loan Deposit Scheme which removes the mortgage insurance component,” he said.

“Consulting a financial adviser is your best option, as they can run long-term estimates that will take into consideration all relevant factors, including your current income, expenses, assets and liabilities, and look at this in conjunction with a potential mortgage and your future superannuation contributions.”

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