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As A Teacher, Can You Salary Sacrifice a Mortgage?

by eBridge author

Can Teachers Salary Sacrifice Mortgages? Everyone knows about salary sacrificing into super, but did you know that mortgages may be eligible? Here are the rules and how much you could save.

In other words, an employee’s total compensation is split between cash and benefits rather than just salary. To receive a non-cash benefit, an employee must forego a portion of their salary. Non-cash benefits include superannuation, mortgage, car, and school fees. It maximizes an employee’s after-tax benefit while saving the employer money.

An employee (or an associate, such as a family member) may be subject to the Fringe Benefits Tax (FBT), which some employers pay on top of their salary or wages. Employers in certain industries may be eligible for an FBT exemption or rebate, allowing them to offer salary packaged benefits to employees at a lower cost. This generally applies to hospitals, registered charities, and other non-profits.

Your post-tax position depends on the benefit type and its FBT treatment. This determines whether salary sacrificing is cost-effective for both parties.

Can Teachers Salary Sacrifice Mortgages?

You should check with your HR or payroll department to see if salary sacrificing is an option for you. Calculate whether salary sacrificing mortgage payments will give you a financial benefit. If your employer agrees to salary sacrifice your mortgage payments, get it in writing. This specifies the salary sacrifice terms, the amount, and the lender to whom the mortgage payment will be made.

During the term of the agreement, you will not have access to the sacrificed salary. Pre-tax mortgage payments are made directly to your lender. A salary sacrifice cannot be redirected after the employee has earned the salary for the period.

Consider Refinancing Your Mortgage

Refinancing may provide one or more of the following benefits, depending on your loan type:

  • a lower rate (APR)
  • a lower monthly bill
  • a shorter payoff term
  • cashing out equity for other purposes

Refinancing helps cash-strapped borrowers find room in their monthly budget. This could be beneficial if you expect rising costs of living (like having a baby) or falling income (from job loss or decreased hours).

When you refinance, you can use some of the equity in your home to pay for other expenses. “About half of the people are pulling cash out, and they are looking to either reinvest in other properties or send their kids to college,” English says.

Sometimes homeowners want to refinance to reduce their current 30-year mortgage to 15 years. Depending on your interest rate, this may only slightly alter your monthly budget while helping you pay off your loan faster.