Retirement Age Borrowing Power Calculator
Enter your details below and discover whether your exit strategy for a home loan will be acceptable to the bank.
Disclaimer: This calculator has several assumptions and simplifications and so should be used as a guide only. Please seek independent financial advice and your own circumstances before making any decisions about your home loan repayments. Making interest only repayments can significantly increase the cost of your mortgage over the term and expose you to higher repayments at the end of the interest only term
Does your exit strategy stack up?
If you’re close to retirement age, lenders typically require you to provide an exit strategy for how you plan to pay off your home loan.
The bank may knock back your home loan exit strategy if your plan is deemed high risk or unrealistic, or doesn’t otherwise meet te lender’s policy.
- Prepare a different strategy.
- Apply with another lender.
- Reducing the loan term: This includes making sure your home loan is paid off before you retire. Please note that the retirement age varies from lender to lender.
- Downsizing your property: You can sell your home and move into a smaller property after you retire. However, some lenders may not accept this.
- Using your super fund: You can use a lump sum or ongoing income from your super fund to pay the loan after you retire. Some of our lenders accept a projection of your super and mortgage balance as evidence that you can repay the loan.
- Selling an investment asset: Sale of assets such as investment property or shares held are generally acceptable.
- Passive post-retirement income: Passive post-retirement income streams can be acceptable if they’re sufficient to service the loan after retirement. E.g. rental income, annuities, dividends etc.
- Projected income or superannuation balances;
- An anticipated Workers Compensation payout;
- An anticipated Family Law settlement;
- An anticipated employers bonus payment or wage increase;
- A sale of a business.
- Preferred suburb or neighbourhood;
- Preferred size of the property, i.e. downsizing from four bedrooms to a two bedroom unit;
- Price range etc.
- Exit strategy home loan template 1: Approved by Macquarie Bank
- Exit strategy home loan template 2: Approved by AMP Bank
- You’re required to do manual labour.
- You have a succession plan for management.
- It’s reasonable to assume that the business can continue to operate without you.
- Superfund statement
- Superannuation calculator to work out how much super you’ll have when you retire.
- Amortization calculator
- Letter from a financial planner
- Evidence of investment properties held
- Share portfolio statement
- Get an experienced mortgage broker to help you prepare a solid exit strategy;
- Apply with a lender who is flexible policies for mature borrowers; or
- Reduce the loan term, so that the loan term is paid out before retirement.
Your exit strategy will depend on your asset position, income and retirement plans.
We can help you choose a lender that will take a common sense approach to your situation and future plans.
Speak with one of our mortgage brokers by calling us on 1300 889 743 or by completing our free online application form.
What is a mortgage exit strategy?
An exit strategy is effectively a backup mortgage repayment plan.
Technically, all home loans have an exit strategy. It’s paying off the mortgage over 30 years. Lenders require you to provide an exit strategy only when the standard one doesn’t work.
For example, many wharves in Sydney have luxury leasehold units in them. Since they’re over water, they have a 99-year leasehold title instead of a freehold torrens title.
The lease may have only 20 years remaining at the time you buy it. In this case, lenders won’t accept a 30 year loan term. In most cases, the exit strategy is to shorten the loan term to be 5 years shorter than the remaining lease term.
Development loans generally also require exit strategies. A property developer may not afford to keep all of the units when the building is complete. So, the bank accepts an exit strategy of selling some or all of the units.
What’s considered a good mortgage exit strategy?
There’s no such thing as the best strategy! But you can aim to have the best mortgage exit strategy that suits you the most and still acceptable to the lender.
Lenders commonly accept strategies that include:
If your strategy doesn’t work, it may be better to avoid getting a mortgage. Apply only when you’re sure that you can afford making the mortgage repayments.
What’s considered a bad exit strategy?
Generally, the following are usually not acceptable as an exit strategy for mature borrowers:
However, there’s a lot of grey areas here. We’ve seen lenders make exceptions and approve people with exit strategies similar to these where we could provide evidence and their strategy made sense.
Downsizing as an exit strategy
Downsizing to a smaller house when you reach the age of retirement is accepted by a few lenders as an exit strategy, however, not all do.
Many of our customers have successfully used downsizing in combination with their super balance or investments to make it a solid plan.
When using this strategy, you’ll need to provide details such as:
Please note that in cases, where you already live in a two-bedroom unit or smaller, it’s difficult to convince lenders that downsizing is a viable option.
Exit strategy home loan templates
Here are a couple of exit strategy home loan templates that demonstrate how downsizing can be utilised as an exit strategy. Both home loan exit strategy letter examples were approved by the lenders.
Mortgage exit strategy FAQs
Do investment properties need exit strategies?
You actually don’t need an exit strategy on an investment property. This is because you can sell it anytime without financial hardship.
Under the National Consumer Credit Protection (NCCP) act, you’re considered to be in financial hardship only if you can’t pay off a mortgage without selling your home.
However, some lenders don’t approve mortgages for investment properties unless you provide an acceptable exit strategy.
You can speak with a mortgage broker like us if your lender asks for an exit strategy for your investment loan. We’ll help you find a new lender.
What if I own a business?
If you’re a business owner, you may still be earning an income past the normal retirement age. This typically depends on whether or not:
We can present a case to some of our lenders to show that you can continue to make your mortgage repayments past the normal retirement age.
What documents do I need to provide with an exit strategy?
Depending on what exit strategies you use, you’ll have to provide different documents but generally you’ll need:
Golden tips for mature borrower
Follow these three golden tips as these are the key to getting approved for a home loan as a mature borrower:
Who can help me prepare a mortgage exit strategy?
Professionally qualified and experienced mortgage brokers can help you prepare an acceptable exit strategy.
Our mortgage brokers know and understand the policies of the major lenders. They are credit specialists that know which banks have more lenient lending guidelines.
You can call us on 1300 889 743 or complete our free online assessment form and one of us will contact you to discuss your situation and loan needs.