Age matters when applying for a home loan

While banks are generally open to lending to senior borrowers, there are some conditions that you have to meet.

Lenders typically require you to provide an exit strategy on your mortgage if you’re closing in on retirement.

However, not all exit strategies are accepted so read more to find out how to present a one that is acceptable to the bank.

Does your exit strategy stack up?

Your exit strategy depends on your asset position, income and retirement plans. However, banks may not accept your exit strategy if:

  • Your plan is high risk or not realistic.
  • It doesn’t meet their policy.

To get around this is simple. You can either prepare a different strategy or apply with another lender. We have access to almost 40 lenders all over Australia. We can help you choose a lender that can agree with your exit strategy.

You can 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:

  • 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.

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.

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:

  • 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.

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.

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.

  • McGuinness

    I have a well defined mortgage exit strategy and yet I was declined by the bank I first went with. Can your brokers help me qualify as I don’t think I can on my own?

  • There are three important steps to getting loan approval especially if you’re 50 years or older – you must have a defined exit strategy, you must repay the loan prior to retirement and you should apply with a lender that understands and accepts your specific situation. Our brokers are experts in the policies of major lenders and know which banks have lenient lending guidelines so please call 1300 889 743 to speak with an expert mortgage broker.

  • paxton

    Can I have a simple example of an acceptable exit strategy to qualify for a home loan using annuity income?

  • Hi paxton,

    You can simply prove that you could pay off the loan from sale or realisation of assets, e.g. Investment Property, Shares, and Lump Sum from Super. Two of our lenders can help with the annuity income home loan though your income will need to be permanent or outgoing, or it will need to continue until the end of the loan term.

  • Caruso

    I’m a small business owner and my son will take care of the business once I retire but I’ll still be earning through it. Will the banks be able to accept this?

  • Hey Caruso,

    Some lenders may not be able to accept this. However, 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. Please feel free to contact us by calling 1300 889 743 to find out more.

  • Conno

    I’m just wondering if you were able to help McGuinness aquire a home loan with their well defined exit strategy,it would be good to here some positive news on this front. A lot of brokers talk the talk but are unable to deliver and every broker has a different story even if there are using the same lender?

  • Hi Conno,
    We can’t disclose the individual circumstances of a particular person. However we can say we’ve had many wins on this front with customers who are declined by their bank due to their expected retirement age and exit strategy. You can read about some of the difficult loans we’ve arranged here

    We can’t help everyone of course. As a general rule if you have a sound strategy to pay off your home loan by downsizing, with additional repayments, superannuation or selling an investment property then we can usually get your loan approved.

  • Ethel

    We are not sure of all the different lenders out there so can you help me understand what which lender is good at what they are typically bad at? Just the big 4 will do I guess.

  • Hi Ethel,
    We have an entire section on our website that has expert reviews on different banks as well as non-bank lenders all over Australia. It includes their strengths and drawbacks so please feel free to scour through the section as much as you’d like:

  • Baldwin

    May I get some help from your brokers to help me with some calculations on my investment property purchase? I want to know if I will be negatively gearing or not.

  • Hello Baldwin,

    You can actually simply try out the investment property cashflow calculator to get an accurate estimation of the weekly cashflow position of your next investment property and find out whether your property will be positively or negatively geared. Here’s the link to the calculator:

  • Abraham

    I’m 56 years old and am seeking a mortgage. I have applied for a home loan with Liberty and they’ve asked for an exit strategy. I was wondering what exit strategies would lenders accept if you are seeking a home loan and it’s clear you will be in retirement within a 25 or 30 year home loan term?

  • Hi Abraham,
    Lenders have different opinions about what a reasonable exit strategy is but all agree it should be a realistic one. As a general rule, investment loans don’t need an exit strategy as you can sell the investment property when you retire and it hasn’t affected your home. Whereas selling your home to pay out a debt leaves you with nowhere to live. Some lenders will accept this if you have enough equity to downsize to a smaller property, but most would decline your loan. You can also show evidence of your superannuation, shares or other property that can be used to pay off a home loan. Some lenders will allow a conservative projection using the growth of your superannuation.