Smart Ways To De‑Gear a Big Home Loan Before You Retire

Most Australians who reach their 50s with a large home loan and a decent portfolio share the same fear: “What if rates stay high and I’m forced to sell my best assets at the wrong time?”

De‑gearing a large home loan before retirement means planning a 5–10 year pathway to reduce non‑deductible home debt to a level that feels safe on your expected retirement income, without panic selling or breaching bank covenants. Done well, it’s a calm, staged process that lines up your loans, super, and property exits so you stay in control.

This guide is written for asset‑rich, time‑poor people who need decision‑grade answers, not theory. The goal: a plan you can start this week.

A clear runway from high gearing to a manageable retirement debt load.

1. Start With the Only Question That Really Matters

Before you touch a spreadsheet or call a bank, you need one number:

How much total home debt do you want by the time paid work is optional?

Not what the bank will lend. Not what the property market might do. A number that lets you sleep when your income is mainly super, pensions and investment income.

For most clients in their 50s and early 60s, that target falls into one of three camps:

1. Debt‑free home by 60–65
2. Modest, manageable home loan into retirement (e.g. $200k–$600k)
3. Higher leverage by choice (e.g. strong business/investment income and want to keep gearing working)

How much debt is “safe” in retirement?

There’s no single rule, but three filters help:

1. Repayment ratio – A robust guideline across our work is to keep total home + investment loan repayments under 30–35% of after‑tax income at rates 3% above today.[6][10][12][18]
   In retirement, your income is usually lower and more fragile, so you often want to be closer to 20–25%.

2. Time horizon – If you’re 52 with strong income, you can carry more debt than someone 63 and semi‑retired, as long as there’s a credible 10–15 year paydown path.

3. Buffer comfort – If you consistently hold 3–6 months of total living costs and repayments in cash/offset before investing further, you can handle more short‑term volatility.[19]

Quick self‑check (you can do this tonight):

• Add up all scheduled home + investment loan repayments.
• Model them at current rates + 3%.
• Divide by your after‑tax household income.
• Note the % now, and what it would look like if one of you stopped work.

If you’re heading into your 60s and that figure is still well over 30–35%, a structured de‑gearing plan is non‑negotiable, not optional.

2. Why Fire Sales Happen – And How To Avoid Them

Fire sales aren’t just about bad markets. They usually come from a mismatch between timeframes:

• Loans and interest costs react immediately to rate changes or income shocks.
• Property and shares often need 6–18 months to sell well, especially for higher‑value assets.
• Super and SMSF changes can take years to fully implement.

Common triggers of forced asset sales

1. Interest‑only periods ending without a back‑up P&I plan.
2. Bank serviceability issues – especially if income falls or a business has a bad year.
3. Broken buffers – redraw used as a buffer and quietly run down.
4. Unplanned life events – health, divorce, adult children needing support.

Roy Morgan data in 2026 shows over 32% of mortgage holders ‘At Risk’ of stress, with repayments taking a high share of income at standard variable rates. When you’re older, you have less time to recover from those shocks – which is why a clear de‑gearing runway matters more than an extra half per cent of investment return.

The antidote: a 5–10 year runway

A good de‑gearing plan gives you:

• Time to sell well, not quickly.
• Space to refinance while your numbers still look strong.
• Orderly use of super contributions and pensions.[/insights/coordinate-gearing-exit-plan-with-super-smsf-retirement-income]

Think of it as building a glide path, not slamming on the brakes.

3. Step‑By‑Step: Designing Your De‑Gearing Plan

Step 1: Define your “debt by retirement” target

Work backwards from your lifestyle.

• Decide your target age where paid work becomes optional (e.g. 60, 63, 67).
• Estimate after‑tax income in retirement (super pensions, rental income, dividends).
• Apply a 20–25% repayment cap to that income.

Example:

• Expected retirement income (after tax): $120,000 p.a.
• 25% of this: $30,000 p.a., or $2,500 per month.
• At a stressed rate of 8% p.a. over 15 years, $2,500/month supports roughly $250,000–$270,000 of debt.

So if you currently owe $1.4m on your home at 55, and want to be comfortable by 65, your de‑gearing “gap” is around $1.1m–$1.2m.

Step 2: Map your current position

List out, in one place:

• Home value, loan balance(s), interest rate(s), IO vs P&I, remaining term.
• Each investment property: value, loan, rent, expenses, tax position.
• Business loans or guarantees tied to the home.
• Super and SMSF balances and contribution capacity.
• Cash and offsets.

This is exactly the type of fact base you’d use when designing a property exit sequence.[/insights/property-portfolio-exit-strategy-by-55-60-65]

Step 3: Choose your main de‑gearing levers

Most people end up using a mix of:

1. Aggressive principal reduction on the home loan while income is strong.
2. Targeted property sell‑downs in a specific order.
3. Selective debt recycling, where appropriate, to shift debt from non‑deductible to deductible.[/insights/debt-recycling-after-negative-gearing-rule-changes]
4. Super and SMSF strategies – salary sacrifice, downsizer contributions, pension timing.[/insights/coordinate-gearing-exit-plan-with-super-smsf-retirement-income]

The key is sequence. You don’t want to be selling your highest‑growth property at 63 just to clear a home loan that could have been managed another way.