What is an exit strategy?
It’s a plan for what will happen to your home loan when you retire. The lender/credit provider will need to make sure that you can pay the repayments without having to sell your property.
You will need to show the lender/credit provider how you can pay off your home loan when you reach retirement. The reason you may be required to show the lender/credit provider an acceptable exit strategy is best illustrated by the following example. The example assumes:
>> You are 52 years old
>> You want to buy an owner-occupied property
>> You want to apply for a $300,000 home loan, and
>> He has $300,000 in retirement
From the example above, you can include in your home loan application that:
>> You have $300,000 in retirement
>> Plan to work full time until age 65, and
>> After you turn 65, you plan to work part-time for 5 years
What do lenders/credit providers view as acceptable exit strategies?
Some examples of an acceptable exit strategy include:
>> Sale of your investment property or other assets
>> Your retirement income or payments
>> Reduce the size of your property (if possible)
>> Types of investment or other income you will continue to receive in retirement
How do I show on my home loan application that I have an acceptable exit strategy?
Here are a number of ways you can show that you have an exit strategy. Please indicate on your home loan application that:
>> You have assets (for example, retirement or stocks)
>> You have equity in another property or properties
>> You are planning to move from a full-time job to a part-time job
>> You are planning to retire completely
>> You may inherit later (this may be acceptable to some lenders/credit providers)
>> You are willing to take out a Reverse Mortgage upon retirement
You should be aware that the overall financial position of borrowers is coming into play much more for Australians over the age of 50 looking for a loan to buy their own home or investment property. This means that a lender/credit provider has to document each customer’s asset and liability position to show how their mortgage loans will be repaid once the customer retires or dies. Therefore, it is important that you provide an accurate and acceptable exit strategy.
Can someone help me prepare an exit strategy?
You can talk to experienced and professionally qualified financial brokers. They are well aware of what lenders/credit providers want to see on your application and:
>> Advise you on how to secure additional finances in retirement, and
>> Help you get the comfortable level of excess funds you need to pay off your home loan debt
They have in-depth knowledge of mortgage loan exit strategies and can help you prepare an appropriate exit strategy (if needed) because:
>> They understand how vital it is to present all required information in the best possible way to provide the best chance of getting the loan approved
>> They will be by your side as they understand how lenders/credit providers work,
>> They can do all the legwork for you to prepare a quality home loan application
So don’t worry about finding an exit strategy that is acceptable to lenders/credit providers. A qualified finance broker will make sure that you get the home loan easily and without any stress.