What is an exit strategy?

It is a plan for what will happen to your home loan when you retire. The lender/credit provider will need to ensure that you can pay the repayments without having to sell your property.

You will need to show the lender/credit provider how you can repay your home loan when you reach retirement. The reason why 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:

>> He has $300,000 in retirement

>> You 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 consider 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 investments 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 you have an exit strategy. Indicate on your mortgage loan application that:

>> Has 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 receive an inheritance later (this may be acceptable to some lenders/credit providers)

>> Are you willing to take out a Reverse Mortgage when you retire?

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 have a good understanding of what lenders/credit providers want to see on your application and:

>> Advise you on how to secure additional finances during 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 home loan exit strategies and can help you prepare an appropriate exit strategy (if necessary) because:

>> They understand how vital it is to present all the required information in the best way possible to give the best chance of loan approval

>> 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 you get your home loan easily and without any stress.