Ask Paul: Should we go into more debt to upgrade our home in our late 40s?


Dear Paul,

My husband and I have saved up around $100,000.

We owe $380,000 on our home, which has a current market value of $650,000.

ask paul should we go into more debt for a bigger home in our 40s

We have no other loans or credit cards. We are both 47 and have two children aged 12 and 10.

We have about $80,000 in super and some money invested in shares. We both earn about $100,000 a year before tax. We both plan to work until we are 60. 

We were thinking of upgrading to a new home worth about $700,000 and using $70,000 of the $100,000 as a 10% deposit, and renting out our current home.

Is this a good investment decision? Is taking additional debt in the form of a new home loan a sound decision considering that we are in our late 40s, or should we be contributing more towards our retirement? - Jess and Calvin

A cracking question, Jess and Calvin.

At about your age, Vicki and I were scratching our heads about this one, and I know millions of other Australians are doing so right now.

As we look back over 40 years of property ownership, all in Sydney, where we have lived and worked, we only wish we could have kept all of them!

We paid $90,500 for our first semi in 1983, then sold it in 1987 for $174,000 to buy a bigger home; today it would be worth $2 million, and on goes this story.

So, in principle, yes. If history continues as it has done in the past, holding a well-located property as an investment should work.

Then again, debt can be a problem if interest rates rise, or if you lose a tenant or your job.

So what you need to do is to write a list of the positives and negatives. The positives are pretty easy: good property tends to do well. But have a think about your job security and map out a plan to cope with higher interest rates and so on.

Total security is impossible - we may get hit by a bus or an even stranger event than COVID. But my view is that with two well-paid jobs, savings, your super building with employer contributions and a plan to work to at least 60, if property is your thing then keeping one and buying another certainly has merit.

Just ensure you are happy with your debt levels. Money will not be this cheap forever.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Phil H
August 19, 2021 7.01pm

I hope that is s typo, as I can't understand how a couple approaching 50 could only have $80k in Super. If it is true, then I'd forget about the new house, focus on paying back debt and increasing Super contributions to enable retirement at 60, otherwise they may not be able to afford to retire at that age.

Froarty N
September 8, 2021 4.42pm

They could be migrants - I'm the same age and having been in a country that didn't have super contributions until later on my super balance isn't that of an Australian who has been paying into a super account their whole working life. I'm looking at getting a van to live in rather than being homeless when I retire, as paying rent as a retiree means I'm screwed.

Phil H
September 9, 2021 1.58pm

Thanks for clarifying Froarty N, didn't think of that scenario.

I wish you all the very best for the future and your retirement

John Battista
September 9, 2021 1.30pm

I agree with phill, you dont need $600 000 plus debt on your investment unless you know the property is in a high value suburb like close to city ect so you will get capitol gain reasonably quickly.