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What is an Exit Strategy?
It is a plan for what will happen with your home loan when you retire. The lender/credit provider will need to see that you will be able to afford the repayments without having to sell your property.
You will have to show the lender/credit provider how you can repay your home loan when you hit retirement. The reason you may be required to show the lender/credit provider of an acceptable exit strategy is best illustrated with the following example. The example assumes:
>> You are 52 years of age
>> You want to buy an owner occupied property
>> You want to apply for a $300,000 home loan, and
>> You have $300,000 in superannuation
From the example above, you might include in your home loan application that:
>> You have $300,000 in superannuation
>> You plan to work full-time until 65 years of age, and
>> After you turn 65 years of age, you plan to work part-time for 5 years
What do Lenders/Credit Providers consider as Acceptable Exit Strategies?
Some examples of an acceptable exit strategy include:
>> Sale of your investment property or other assets
>> Your income or payout from superannuation
>> Downsize your property (if possible)
>> Types of investment or other income that you will continue to receive in your retirement
How do I show in my Home Loan Application that I have an Acceptable Exit Strategy?
Here are a number of ways that you can show that you have an exit strategy. State in your home loan application that:
>> You have assets (e.g. superannuation or shares)
>> You have equity in another property or properties
>> You are planning to move from full-time work to part-time work
>> You are planning to retire completely
>> You might be receiving an inheritance later (this may be acceptable to some lenders/credit providers)
>> You are willing to take out a Reverse Mortgage on retirement
You must keep in mind that the overall financial position of borrowers is coming into play a lot more for Australians aged 50 years and over who are looking to borrow to buy their own home or an investment property. This means that a lender/credit provider has to document the asset and liabilities position of each client to show how their home loans will be paid out once the client retires or on the death of a client. So, it is important for you to provide an accurate and acceptable exit strategy.
Can anyone help me in preparing an Exit Strategy?
You can speak to professionally qualified and experienced finance brokers. They are well versed in what the lenders/credit providers want to see in your application and they will:
>> Advise you on how to secure extra finances during retirement, and
>> Help you to get the comfortable level of surplus funds that you need to pay out your home loan debt
They have thorough knowledge of home loan exit strategies and can assist you with preparing a suitable exit strategy (if required) because:
>> They understand how vital it is to present all the required information in the best possible way to give the best chance of having the loan approved
>> They will be in your corner as they understand how the lenders/credit providers work,
>> They can do all the legwork for you in putting together a quality home loan application
So, don’t worry about finding an exit strategy that’s acceptable to lenders/credit providers. A qualified finance broker will make sure that you obtain the home loan easily and without any tension.
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