Is a salary sacrifice home loan the right product for you? Learn what’s involved in a salary sacrifice mortgage and whether you are eligible.
A salary sacrifice home loan could be the best option for you depending on your financial circumstances. Essentially, a salary sacrifice mortgage is a type of home loan which you repay directly from your salary before tax is applies. There are a lot of things to recommend this type of loan, among them less tax paid at the end of the financial year which particularly helps higher income earners.
What is a salary sacrifice mortgage option?
If your employer permits this type of home loan arrangement and your lender is comfortable with this type of repayment – please note that not all employers will offer this option and not all lenders will approve your application even if your employer is willing – then basically the repayment for your mortgage will be deducted from your gross income.
Each month, before you receive your money, the repayment for your home will be deducted from your pay cheque and then income tax and your superannuation will be calculated on the remaining sum.
As your repayments are taken before tax you may be able to make larger repayments and pay off your home sooner. You are also liable for less income tax at the end of the year as your income has dropped. Please note that this will also apply to your superannuation payments which will fall in line with your income.
Not all employers allow this type of arrangement so you will need to enquire if your employer has not offered it outright. You may also be liable for an administration cost for the setup as decided by your employer.