Borrowing for over 50s

As anyone of middle age will attest, turning 50 can creep up on you. We know that 50 is the new 40! But if you want to take out a loan and you are over the age of 50, you may need to provide more information about your future financial position before you can borrow. This is typically called an exit strategy.

What is an exit strategy?

An exit strategy is a plan for what will happen with your loan when you retire. If your loan term extends past typical retirement age (around 70 years old), a lender will usually need to see evidence that you will be able to afford the repayments. For borrowers who take out an owner-occupied home loan, selling the house is not seen as a valid exit strategy.

A mortgage adviser can assist you in putting together an exit strategy depending on the loan you need, your financial circumstances and the exact requirements of your lender. Your exit strategy will vary according to your age, asset position, income and retirement plans, so you will typically need to provide all these details to your lender.

Common exit strategies include:

• the sale of assets such as an investment property or shares
• lump sum repayments from superannuation
• ongoing income from superannuation or investments (such as property, managed funds or shares)
• downsizing to a smaller home when you reach retirement (not accepted by all lenders)
• likely inheritance (not accepted by all lenders).

Since everyone’s situation is different, the need for an exit strategy is usually assessed on a case-by-case basis by the lender. For example, if you plan to work past retirement age, this will affect your application. If you can’t show an acceptable exit strategy, the lender may require the loan term to be reduced to ensure your loan is paid off before you hit retirement age.

Find a good mortgage adviser who knows what the different lenders require, as they differ in terms of the age at which they require an exit strategy and the exact information they will need.

Your adviser can also advise you which lenders will be more likely to give you a loan based on your circumstances, and ensure your exit strategy will be acceptable to the lender you have chosen.

Call your Mortgage Choice Broker to discuss your exit strategy today.