Is retiring mortgage free still an attainable dream?

Not too long ago the Great Australian dream of home ownership was considered a way to fund retirement.

Ask any Baby Boomer and they’ll tell you their parents taught them to get a good education, get a secure job, buy a home, pay it off and voila!

You’ll be set for your golden years!

Well… it’s not really as simple as that – it takes more than just one house to fund retirement, but owning your home free and clear in your latter years is a good start.

So it’s scary to think that many Gen Y’s won’t have the opportunity to own their home outright when they retire in thirty to forty year’s time.

And it is likely that the financial security of owning your home mortgage free will be even more important then in the future when people will be living longer and superannuation may not be sufficient to support their lifestyles.

Why I am saying this?

Well…I remember reading a study from the Australian Housing and Urban Research Institute which predicted that just one in 40 Gen Y’s will be mortgage free when they retire.

And that’s not the worst of it…

The study suggested that almost nine in ten of this beleaguered demographic group will end up on low incomes that will make it increasingly difficult to service repayments and cost of living expenses.

Gen Y’s are leaving it late

One of the problems is they are leaving the purchase of their first house till much later – often not until they’re in their 30’s.

Some choose to travel the world first, while others are finding the cost of new housing too expensive and tend to rent for longer.

What can we do?

We live in one of the richest countries in the world and we’re entering a period of unprecedented wealth.Piggy Bank with retirement savings super message

But the sad reality is that the majority of us haven’t been taught how to handle money or secure our financial futures, which means many Australians find their money runs out before the month does.

We’re not really taught to become financially fluent at school and sadly for most of us, our parents weren’t good financial role models.

However there are more great books, Internet sites and wealth educators around than ever before, so there is really no reason why we shouldn’t be more financially literate than our parents.

And if you think about it, out of all the demographic groups, Generation Y’s are in the best position possible.

While Baby Boomers have a few good investment years left and Gen X’ers have a few more on top of that, it’s the Gen Y’s who really have time on their side.

And time (which allows wealth to compound) is the great ally of investors.

Add to that the fact that despite what many suggest housing is as affordable as it was a decade ago and our the banks are keen to lend to people buying their own homes, that makes it an opportune time for not only Gen Y’s, but all of us, to secure our financial futures by buying well located properties.

And then letting compounding, leverage and time work its magic in building our wealth.

But aren’t properties unaffordable for first home buyers?

Sure getting into the property market today seems difficult and the price of property in our capital cities is expensive, but that does not make it unaffordable.

Getting a foot onto the first rungs of the property ladder has always been difficult and always will be.

However recent HIA/Commonwealth bank affordability studies show that buying home today is no less affordable than it has been in the past.

Part of the reason many households actually have more disposable income than past generations is because:

  • Per capita disposable income has been growing very strongly and has outpaced house price appreciation over the last 7-8 years.
  • We have had the rise of multi-income households
  • Over the longer-term, we have had a structural decline in the unemployment rate from the double digit peaks in early 1990s to around 5% today
  • We now have lower nominal mortgage rates due to the decline in inflation.

What to do?

While I do agree that finding an “affordable” house close to the CBD in our major capitals is a challenge, many Gen Y’s are now trading the backyard for a balcony and buying apartments.

Other are beginning to realize that maybe they can’t start off in the type of property their parents live in today.

They forget it took their parents 30 or 40 years to be able to afford that type of property.

By the way…if you’re looking to get into property, remember sometimes it’s easier to buy an investment property before you buy your first home as banks may lend you more because your tenants will help subsidize your mortgage payments.

There really is no need to give up on that Great Australian Dream.

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

'Is retiring mortgage free still an attainable dream?' have 5 comments

  1. April 27, 2012 @ 5:43 pm Melanie Monico

    Getting a foot onto the property ladder is a good idea if property investment is a priority. Whether it is your ideal home, if can be rented out or rent out a room whilst you live in it in order to make repayments more feasible.
    There are Government initiatives available for first home buyers that might be worth looking at:
    Taking alternative routes to property ownership might be the best option for Gen Y, the great Australian dream is still in reach


  2. April 14, 2014 @ 11:03 am Mortgage Free In Retirment | Affordable Homes

    […] So…don’t sit back and complain that there are no opportunities to get on to the property ladder, instead, step back and have a look around or drop us a line and we can maybe find some ways to help you become a home owner. via Is retiring mortgage free still an attainable dream – Property Investment Update. […]


  3. April 14, 2014 @ 5:13 pm Melodie

    Of a group of my son’s friends I was unsurprised to learn that many of them have bought an investment property instead of a home in which to live. Those I have chatted with indicated that although they are no longer eligible for the FHOG they believe it was the right move and a couple of them are actively looking for their second investment property.
    Depending on strategy, certainly, the Australian dream is alive an well… just they’re not dreamers any more…


  4. January 15, 2016 @ 5:34 am ChrisH

    …..many retired baby-boomers with their ‘mortgage-free’ home are ‘asset-rich’ and very CASH -poor…!! Living longer in a “state of poverty” in the mortgage free “mansion on the hill”……Equity release’ lending is just a massive rip-off’ and selling up and downsizing often a pathetic result…. a sad result of a lifetime of mortgage slavery…!!!!


    • January 15, 2016 @ 8:23 am Michael Yardney

      You’re right – most Baby Boomers aren’t prepared for retirement – but not becuase they took out a mortgage.
      aIt’s because they didn’t take out another one and invest


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