If a lender is concerned about your ability to exit your home loan they may ask about your exit strategy before approving your mortgage. It's nothing to worry about, but it means you'll have to do a little more work on your application.
There may be some very unique investment property circumstances that require an exit strategy, but the most common case in which you’ll need to provide one is if you’re over the age of 50.
Because home loan terms run for 30 years and retirement age is 65, lenders can be hesitant to lend to borrowers over the age of 50 unless there’s a clear plan in place for paying off the mortgage either before or after retirement. However, if you can demonstrate a solid plan, you’ll be able to make a much better case for getting your home loan approved.
The sale of your primary place of residence is not considered an acceptable exit strategy by some lenders. However, the sale of other assets can form an acceptable exit strategy:
In addition to this, you can inform the lender of actions you plan to take to form part of your exit strategy. For instance:
You can inform lenders about your particular circumstances in your home loan application. You can let them know about your assets and passive income in the relevant sections on the application.
If the application form has no section or questions related to your exit strategy then you can write a letter setting out your home loan exit strategy. Be sure to keep the letter clear and detailed, perhaps with a list of actions you plan to take.
A good mortgage broker can help you draft an exit strategy and present it to a lender in the form that’s likely to give your home loan application the best chance of success.
Photo by Aaron Burden on Unsplash
Source: https://www.finder.com.au/home-loan-exit-strategy
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