Refinancing to ease school fees without derailing retirement plans
For many families, there is a period in life when expenses peak and the right holistic financial decisions are important. Mortgage repayments are still significant, children are in secondary school, and private education costs can put real pressure on household cash flow, even for high‑income earners. So how do you balance competing financial goals?
This was exactly the position one client found themselves in when they came to us for advice.
The clients' challenge
The clients were a couple in their early 50s with two teenage children attending private school. They owned their home with a remaining mortgage of around $650,000, and approximately 22 years left on the loan. Their home was valued at about $2 million, and between them they had built a solid superannuation balance of around $600,000 through regular contributions.
Their long‑term plan was sensible and well thought through. They intended to work until around age 67, then downsize from the family home into a smaller three‑bedroom unit worth roughly $1.2 million. This would free up significant capital to support their retirement.
In the short term, however, school fees of around $60,000 per year were putting pressure on cash flow. They knew their mortgage interest rate was no longer competitive, but they were unsure how best to restructure their loan without creating problems later on.
Their key questions were simple:
* How can we reduce our repayments over the next few years while school fees are at their highest?
* Will refinancing now compromise our ability to pay off the loan before retirement?
* Are there smarter options than simply chasing a lower interest rate?
Looking beyond the interest rate
Rather than defaulting to a basic refinance, we stepped back and looked at the bigger picture. Cash flow needs today, debt levels tomorrow, and how the mortgage would interact with their retirement strategy.
We modelled several possible refinancing options, each with different trade‑offs.
| Option | Pros | Cons |
|---|---|---|
| Lower rate, same term | Around $500 per month saving. Lower interest over time. | Insufficient short-term cash flow relief. |
| Lower rate, extend to 30 years | About $1,000 per month reduction. Easier cash flow. | More interest overall. Higher balance at retirement. |
| Interest-only for three years | About $1,500 per month relief. Flexibility later. | Loan balance does not reduce during IO period. |
While all three options had merit, it quickly became clear that the decision wasn’t just about today’s repayment amount. It was about how long the school fee pressure would last, and what would change once that expense disappeared.
The strategy
After working through the scenarios, the couple chose the interest‑only option for three years.
This approach delivered the greatest short‑term relief, reducing their monthly repayments by around $1,500 during a financially demanding period. Importantly, this wasn’t seen as kicking the problem down the road. It was a deliberate, time‑bound strategy with a clear plan for what would happen next.
They were comfortable that once school fees ended, their overall expenses would fall sharply. This would give them room to increase repayments and get the loan back on track.
To make sure the strategy was realistic, we mapped out the numbers beyond the interest‑only period. To be mortgage‑free by retirement, they would need to pay an additional $1,500 per month on top of the minimum required repayment once the loan reverted to principal and interest.
Given their expected cash flow position post‑school fees, this level of repayment felt achievable and sustainable.
The outcome
With this structure in place, the couple was able to:
* Reduce their monthly mortgage repayments by $1,500 during a peak expense phase
* Maintain flexibility to increase repayments once school costs ended
* Stay on track to clear the home loan before retirement
* Retain the option of paying off any remaining balance using super if needed
* Continue with their downsizing plan, which would free up approximately $700,000 to support retirement
Just as importantly, they gained confidence. Confidence that today’s decisions weren’t undermining tomorrow’s plans, and that their mortgage was working with their broader financial strategy rather than against it.
The key takeaway
This case study highlights an important point. The “best” refinance is rarely just the one with the lowest headline interest rate.
Without tailored advice, this family may have refinanced into a slightly cheaper loan and continued to strain under the weight of school fees. Instead, by taking a holistic view that considered cash flow, debt management and retirement planning together, they were able to ease short‑term pressure without losing sight of long‑term goals.
I’ve recently helped a number of our clients achieve their goals with improved lending options. If I can help you or someone you know, please contact your FMD adviser or book a chat with me.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.