Could refinancing your mortgage help close the gender gap in super?

6 min read | 20 Mar 2020

We live in a lucky country, especially when it comes to our super system. But women aren’t benefiting from this anywhere near as much as men are, in fact, only half as much. As International Women’s Day rolls around for 2020, here at Athena we wanted to share one very big thing that women can do to help re-write their future stories – starting now. 

After spending their working lives smashing glass ceilings, leaning in, pushing for pay equality, raising children and caring for parents, Australian women are on average, rewarded with 47% less superannuation than men at retirement. Then go on live 5 years longer.

There has been a staggering shift in the last decade of poverty and homelessness for women in general, especially after retirement. Our superannuation and financial systems were constructed for more traditional family models, they are fast becoming unfit for the world we live in today. Between divorce, separation and single living, women often lose the safety net that they never really had.  

The good thing is, there is more of a focus on this than ever. We know that not one, but many things can help. From increasing the minimum super contribution for everyone, workplaces better supporting time off raising kids, super funds removing fees whilst women are out of the workforce, and ultimately addressing the gender pay gap. The question is, how quickly will we see super balances and retirement outcomes change for women, and what can women do right now to save themselves? 

We are passionate about helping women to pay less on their mortgages. An average Athena customer saves $60,000 over the life of their loan by making the switch. These savings could be redirected into additional super contributions and lead to a very different retirement outcome for women. And at the same time obliterate the gender super gap. 

We calculated that an average 35-year-old woman, with a standard mortgage of $450,000 with 25 years remaining, on a typical big bank mortgage rate of 3.32%, could end up with $140,000 extra in her super fund by refinancing to a lower rate and contributing the monthly savings to her superannuation fund.  

By simply refinancing to a better interest rate, for example Athena’s standard variable, P&I, owner occupier rate is 2.59% p.a. (2.55% p.a. comparison), the monthly savings could be $171. Over the life of the loan she could save herself or her family around $50,000.  

And if she contributes that $171 into her superannuation fund every month over the remaining life of the loan until age 60 (and assuming 20 year returns to super of 7%), she will increase her final super balance by an incredible $140,000 at age 60. If structured as salary pre-tax contributions the benefits could be even greater.  

So what happens to our money savvy goddess? Her super balance goes from being 33% behind at age 35 to 50% ahead of the average male at age 60, closing the gender super gap and then some!  

Alternatively, some women may prefer to have their eggs in a few different baskets. Even paying $85, only half of the monthly loan savings into super will result in an extra $70,000 in retirement.

Gap closed again!

If the other $85 is put back in the loan’s redraw or offset a further $10,000 could be saved off the mortgage. That means property ownership 1 year and 4 months earlier. This approach alone won’t make as much money in the long run as putting it all in super but it may provide the peace of mind knowing the funds are available for a rainy day and may balance against potential volatility in super investments. 

The takeaway? You can keep putting money in your bank’s pockets, or you can pay your future self. I know what I prefer. 

• Find out what your mortgage rate is. Only 50% of people know what their rate is. If it doesn’t start with a 2, it’s probably time to shop around.  

• Understand the real cost of your mortgage. Many lenders lump you with a variety of fees from annual, to offset and, early repayment fees. It’s bonkers and it’s unfair. Go through your annual statements and calculate the fees and then multiply by 25 years. You’ll be shocked at how much you’re paying.  

• Think long-term. Don’t be lured by cash back. Lenders cleverly play on human behaviour to want stuff now, and $4,000 cash back sounds like a great deal. It’s not. More often than not you pay back that ‘free money’ plus more in a higher interest rate and fees in the first few years let alone the remaining. If you opt for a lower interest when you refinance you’ll likely save far more than the initial cash back over the life of your loan.  

• Honeymoon rates are another trick lenders like to lure you in with. It’s basically a lower rate that reverts to a higher (often much higher rate) when you the honeymoon is over. But at least you’re told about this upfront. 

• Loyalty tax is far more prevalent. It is the of the gradual increase in rates that happen when you’re a loyal customer for too long. The sexy new rates that get offered to new customers are now outside your reach. Look for lenders that reward your loyalty, not penalise you for it. 

• When you do refinance set up your loan to work harder for you. Paid off 5 years already? Then demand a 25 year loan term, don’t restart back at the bottom of the ladder. Look at your repayment structure, do you really need an interest only loan? Get straight into paying down the principal and save a mozza.

• Don’t get caught by paying monthly only fortnightly or weekly repayments can save years off your loan by sneaking in a few extra payments a year that you don’t even notice. 

There has never been a better or more important time for women to pick up the challenge of becoming their own financial CEO and feel proud about their futures. 

Micro shifts are often more successful than large ones. Over time small consistent changes in financial behaviour can make the difference between homelessness in retirement, and a safe, comfortable and enjoyable time in the sun. 

So stop waiting, and get your money working harder for you. Your biggest outgoings can have the biggest savings, like switching mortgages and getting a better deal on utilities or health care. Make the move, get the deal you deserve and put those savings first into the areas of your life that need the most love.  

Pay off any credit or high interest rate debt asap and then cut up those cards. Build a safety buffer of at least 3 months income, in case you need it. You never know when you will, but at some point you are likely to and being able to sleep soundly is worth a whole lot.

Keep that safety stash somewhere where it can work for you, like in your redraw or offset. Once you’ve got the basics sorted, double down on smart strategies: pay off your home loan faster, make extra super contributions and invest outside of super.

There isn’t a one size fits all, and it’s important to get advice if you need it, including talking to your super fund on how to make the most efficient contributions. 

Once you channel your inner financial goddess, make sure you reward yourself and start talking to the sisterhood. Let’s get all women in Australia paying it forward for themselves. 

Mira Hohn – Chief Product Officer at Athena, Bio

Mira is passionate about financial freedom for all, where every Australian has access to seriously good products to manage their money paired with education that liberates them to a different future. As Chief Product Officer at Athena, she believes that life is too short for a long home loan and is focussed on transforming every aspect of mortgages for the better. With over 15 years experience in building businesses, creating phenomenal products and improving everything she can, Mira has sought to do good in the financial world. She worked across the GFC in the UK helping banks survive and then thrive, launched and scaled the nabtrade online equity business at NA. Now at Athena she is inspired by the ‘Goddess of Good Stuff’ to lead a team of legendary loan warriors. Sticking with the theme, Mira loves all things Mediterranean, with a penchant for sparkling salty blue water, juicy tomatoes, ocean air and mountain running.