How Do You Prepare an Acceptable Exit Strategy for Your Home Loan?

November 17, 2021 0 Comments

What is an exit strategy?

It is a plan of 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

>> You have $ 300,000 in retirement

In the example above, you can include the following in your mortgage loan application:

>> 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 consider acceptable exit strategies?

Some examples of an acceptable exit strategy include:

>> Sale of your investment property or other assets

>> Your income or retirement payment

>> Reduce the size of your property (if possible)

>> Types of investment or other income that you will continue to receive in retirement

How do I show in my home loan application that I have an acceptable exit strategy?

Here are several ways you can show that you have an exit strategy. Indicate on your mortgage loan application that:

>> You have assets (for example, retirement or stocks)

>> Has equity in another property or properties

>> Plan to move from a full-time job to a part-time job

>> Plan 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 situation of borrowers comes into play much more for Australians aged 50 and over looking to borrow to buy their own home or investment property. This means that a lender / credit provider has to document the asset and liability position of each customer to show how their home loans will be repaid once the customer retires or a customer dies. Therefore, it is important that you provide an accurate and acceptable exit strategy.

Can anyone help me prepare an exit strategy?

You can speak with experienced and professionally qualified financial brokers. They are knowledgeable about what the lenders / credit providers want to see on your application and they:

>> 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 a thorough understanding of home loan exit strategies and can help you prepare a suitable exit strategy (if needed) because:

>> They understand how important it is to present all the required information in the best possible way to have the best chance of getting the loan approved.

>> They will be on your side as they understand how lenders / credit providers work,

>> They can do all the groundwork 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 stress.

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