Pay down mortgage or invest - Australian

[Shelley]

Details -
Mortgage balance - $348,000
Years Left - 29
Interest Rate - 4% at the moment, variable.
Offset, unlimited free redraws.
Monthly Payment - $1735
Spare Cash now when we scrimp and save - $2300 a month
Spare Cash from June 2018 with car paid off - $3100 a month
Lump sum of $8000 will be added in April from caravan sale.

Superannuation balance at retirement, at current rate with no additional contributions - $444,000

DH will be 60 in 2031.
Aim is to FIRE in 2031 if possible.

The scenarios I have run are -

1.
Pay off mortgage at fastest rate, end date will be 28/8/2024.
After mortgage paid off -
Put $1100 a month towards renovations for remaining 6 years (50's home, only one new bathroom, rest is over 30 years old)
And invest $4000 a month. At for example 5.6% by his 60th we will have over $400,000 and a paid off renovated house.
Super + Investment = $844,000

2.
Pay off mortgage at such a rate that end date is DH 60th birthday, 11/2031. ($800 extra payments a month from June 2018)
Put $1100 a month towards renovations (using mortgage offset to save up in the meantime)
And invest $1200 a month till renovations are done (6.5 years at maximum, less for DIY), then up to $2300 a month for 7.5 years.
At 5.6% we will have $500,000 and a paid off renovated house.
Super + Investment = $944,000

Other scenario not run is to up super contributions, with both of the above scenarios. I don't think the renovations will cost what I've put in here, which is about $90,000. We have to do an ensuite and WIR or built ins, all internal except new bathroom and hallway is asbestos so remove all that and gypock and paint. Small extension under main roof to extend living, this will be new kitchen. Plus sand and polish the original hardwood floors throughout which are in a shocking condition. I'm happy to do the renovation bit by bit, rather than paying a building to come in.

While it seems cut and dried that scenario 2 nets us $100,000 more, there is a security to having the house paid off. Not that I want to wait 7 years to not have my kitchen bench start smoking when I use the stove top....

I'd love to know opinions of other Aussies on here as to what you'd recommend we do, and also what you yourselves have done.

Thanks!

[urbanista]

You are 14 years away from accessing super. My suggestion is to maximise super salary sacrifice first, then pay off the mortgage, then renovations.

[marty998]

Yeah I'd max super in your shoes as well, for the next 7-8 years.

You could probably let compounding do it's work after that and use the additional cash flow for mortgage and renovations.

[Bee21]

I presume that your husband pays a lot of taxes so I also vote for salary sacrificing into super (his and yours).

Mortgage payoff has a bad rep around here, but i am a big fan. It depends on your risk tolerance (ours is very low unfortunately, so we will never be rich, but we sleep very well at night. I am ok with it). We  couldn't agree about how to invest our surplus, so we just paid off the mortgage, that was an instant 5.5% return. Actually, given the suboptimal performance of our Vanguard funds, it was a good decision for us.

You can park your savings in an offset account until you figure out what to do, that will also reduce your interest in the meantime.

When do you plan to do those renovations? I desperately wanted a new kitchen and we agreed to have a new one when we paid off the mortgage. By that time we got so  careful with money that we ended up repainting it. Looks good and cost only 200 in paint.

[Shelley]

Thank you, I will run some calculations for the super salary sacrifice. Things might change salary wise in the next few months, I'll do another thread on that as I'd love to see people's thoughts.