“Other people want to get rid of their mortgage.”
Loading
Tindall said in practice borrowers may also be considering the option of offset accounts rather than savings accounts, depending on their personal situation.
She said some home owners may wish to do a renovation or make an investment, and it could make sense for them to keep their mortgage open to access extra funds. If they pay off their mortgage and need money, they may be left considering a personal loan, which can have higher rates, fees and its own application process.
Pre-retirees could benefit from financial advice about their options when close to the end of their mortgage, she said. She added that bad debts were a priority, such as credit card debt that could charge high interest rates of 20 per cent or more and would not rise in value.
Borrowers made $14 billion in excess mortgage payments in the September quarter of 2025, on RBA data, she noted, as owners try to deal with the pressure of higher rates.
“I think COVID changed people’s view of how important household finances were and making sure they were in a good position to tackle whatever might come in our way,” she said.
Chief executive of mortgage brokerage Shore Financial Theo Chambers said owners approaching retirement generally pay off their mortgage rather than saving money due to the more attractive rates, but some may keep their loan facility as a rainy day fund.
He said some home owners who are close to paying off their loans or have paid them off may borrow more money against their home, invest that money and keep the difference.
For example, a Baby Boomer who lives in a home valued at $5 million and has insufficient superannuation may go to a wealth management business and borrow $2.5 million against their home at an interest rate of 5 per cent.
Loading
They invest that money in a private credit fund and earn, for example, 10 per cent. After paying their loan, they are left with $125,000 income a year.
“They don’t have the means to retire, but they don’t want to sell the family home,” Chambers said. “The interest earned is essentially their retirement income.
“Some people are getting forced into retirement sooner than they expected, so these financial planners are doing a good way of creating income.”
Anthony Landahl, managing director at mortgage broker Equilibria Finance, has found home owners close to retirement are generally focused on paying the loan off and may have been making extra repayments.
He said some owners who are starting to look at retirement may have the ability to pay their loan down but choose to keep it for the purpose of redraw. It may be harder to borrow money in future when they are no longer working.
Home owners have been trying to get ahead of rate rises.Credit: Nikki Short
“It might help them with transition to retirement savings or superannuation from time to time, it might help their children – they may gift their child some funds to help with a home,” he said.
“There are people who have a home loan open with $50,000 or $100,000 sitting in redraw that essentially acts as an emergency fund. It’s a peace of mind thing.”