We often hear about millennials struggling to save for a home deposit while enjoying their smashed avocado and latte, but sometimes the 50-plus don’t have it too easy to secure a home loan either!

While applying for a home loan over the age of 50 is acceptable to many lenders and quite common due to divorce, upsizing or downsizing, there needs to be a little more planning required for a successful application.

Borrowers over the age of 50 are increasingly being asked to have a mortgage exit strategy in place to secure finance from lenders.

Why an exit strategy?

When you consider the typical home loan term is 30 years, someone in their 50s would repay their home loan in their 80s. An exit strategy therefore makes sense given the average age of retirement in Australia is approximately 55 years1. Lenders do however generally accept older retirement ages based upon the nature of the borrower’s work.

While it can be more involved for older Australians to get a home loan approval, it’s certainly not impossible. While lenders are not looking to discriminate against older borrowers, they also need to comply with responsible lending conduct obligations. These guidelines place an obligation on the lender to consider the borrower’s financial situation and objectives with the primary intent that the loan will not place them in an onerous financial situation.

What is a mortgage exit strategy?

It is essentially a plan as to how the home loan will be repaid having regard to the borrower’s personal circumstances.
As your finance specialist, we can help you draft a mortgage exit strategy to present to your lender for maximising your chances of home loan approval.

The types of exit strategies the lender may accept include:

  • Access to superannuation in retirement
  • Sale of investment properties
  • Downsizing to a smaller property
  • Sale of shares
  • Use of alternate savings

Other actions you may consider when approaching retirement to meet your home loan commitments are:

  • Part time work – You may consider continuing part time work past retirement age
  • Rental income – If you have investment properties, the rental income might be sufficient to service the loan
  • Shortening your loan term – Assuming you can afford the increased repayments

Don’t be discouraged, we do the work for you!

In your home loan application, you will be expected to set out your mortgage exit strategy. We can help you write a strategy tailored to your circumstances to maximise your chances of achieving home loan application approval.

 

Sources:
1 Retirement and Retirement Intentions, Australia, 2018-19 financial year | Australian Bureau of Statistics (abs.gov.au)
Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. ©2022