What is a Mortgage Exit Strategy? Why You Must Have One!

What Is A Mortgage Exit Strategy and What Do I Need To Know?

When you’re applying for a home loan, your lender might want to know how you plan to exit it. After all, it is a lender’s job to make you understand that you do have to plan your loan repayments and so on.

In this respect, you will need to come up with a proper mortgage exit strategy. You have to make sure that the financial path that you choose will be able to make you exit your mortgage on time and avoid missing any payments.

The Basics

A mortgage exit strategy is, basically, a backup mortgage repayment plan. It is called backup because all home loans come with a standard exit strategy – you simply pay off the mortgage over the duration of the home loan.

However, a lender will require a backup exit strategy in case the standard one is not enough or may not work out until the end.

For example, you are very likely to be required a mortgage exit strategy of your own if you are over 50, as the lender might hesitate to give you a home loan – given that the retirement age is 65.

Types of Mortgage Exit Strategies

Investment Properties

Lenders will usually accept as an exit strategy the sale of an investment property or even the access of equity in a certain investment property.

Downsizing 

Selling your primary owner occupied property to downsize into an encumbered more affordable security.

Shares 

When applying for a home loan, you can show the lender your share portfolio and present it as an exit strategy if you can sell your shares and pay off the home loan.

Superannuation 

Upon retirement, you will be able to access your super. This can be used as a part of a proper exit strategy.

Inheritance

Inheritance may be accepted as a mortgage exit strategy only if you have received it or are about to receive it during the term of your loan. The amount must also be enough to exit your mortgage completely.

Plans for Exit Strategies

In addition to all of the above, you can also inform the lender of certain actions that you plan to take and incorporate in your mortgage exit strategy.

Continued Work

If you plan to move into part-time work or continue to work full-time after the age of 65, then your lender should know this.

Shorter Loan Term

You can also ensure the lender that your loan will be paid off before you retire by taking on a shorter-term loan. Naturally, this will be influenced by your financial situation and ability to undertake higher payments.

Continued Investment Income

If you will still generate income after retirement, then you should let your lender know this. Ongoing rental income or shares that pay dividends may be seen as an acceptable mortgage exit strategy.

The Bottom Line

In short, you may need to think of a secondary mortgage exit strategy, especially if your lender has their doubts when it comes to you paying off your home loan. Informing them of the options that you have in terms of exiting your loan may reduce the risk they take by giving you financing.

So, when assessing your finances and properties, it is better to mention them all, since they can be used as parts of your mortgage exit strategy.

For more information or answers to your questions, you can always contact us. Our experienced staff will guide you through whatever process you need help with and make sure that you are working with the best possible lender for your needs!

Contact us on 02 8530 1107 or Submit your scenario online

So, why use Highline Lending for your home loan?

We meet for a consultation, obtain your supporting documents and proceed to structure and package your application for approval knowing exactly what the banks want to see. We also monitor your home loan post approval ensuring you’re home loan suits you and your financial position

We get paid a commission from our lenders as a result of introducing your business to them. Subsequently, our service is at no cost to you. Our commission does not affect your interest rate whatsoever, if anything, we’re in a position to get you a lower interest rate than the general public due to our relationships with our banks

With our many years experience in the industry, we’ve been exposed to both easy and complex loan scenarios. Each loan we process gets presented to over sixty financial institutions, ensuring we have explored all options possible and are able to provide a solution

Access our free e-guides

Whether you’re a first home buyer looking at entering the market or an existing home owner looking at ways to save money on your home loan, we have you covered. We’ve put hundreds of hours of research into these guides to ensure you end up ahead, and it’s completely on the house.

View All Our Articles
Property & Finance Articles
Justin Wyse

What is a Bank Comparison Rate? Does It Affect My Home Loan ?

In short, comparison rates determine what your loan will really cost you. They save you from the hard work required to compare and determine the costs of different loans. However, keep in mind that they shouldn’t be the deciding factor when you search for a loan.
Also, remember that all lenders are required by law to display a comparison rate when they advertise a loan to you. If you pay attention and spot this rate, you may end up getting a better deal on your home loan.

Read More »

How Low-Doc Loans Can Secure Your Hopes of Refinancing – Guide

The odds are that you’ve stumbled across the term lender’s mortgage insurance and you’re wondering what it stands for. Well, you’ve come to the right place. This article will clarify this term, so that you can understand what it is, the concept behind it and the approximate costs. Let’s get started!

Read More »

What Bank Interest and Assessment Rates Are & How They Are Set!

The odds are that you’ve stumbled across the term lender’s mortgage insurance and you’re wondering what it stands for. Well, you’ve come to the right place. This article will clarify this term, so that you can understand what it is, the concept behind it and the approximate costs. Let’s get started!

Read More »
Property & Finance Articles
Justin Wyse

What is a Mortgage Exit Strategy? Why You Must Have One!

When you’re applying for a home loan, your lender might want to know how you plan to exit it. After all, it is a lender’s job to make you understand that you do have to plan your loan repayments and so on.
In this respect, you will need to come up with a proper mortgage exit strategy. You have to make sure that the financial path that you choose will be able to make you exit your mortgage on time and avoid missing any payments.

Read More »

Download Your Free Guide from Highline Lending

The Ultimate First Home Buyers Guide

What you need to know before you purchase your first property and how to fast track it. We have designed this guide to get you up to date with everything you need to know about being a first home buyer. Whether you have a short term goal of purchasing your first property or are thinking about it sometime later down the track, this guide will cover important essential aspects of this exciting journey.

The Ultimate Home Owners & Investors Guide

What the banks won’t tell you and how to save serious money on your home loan. By Investing 10 minutes of your time to read through our guide, not only will you learn the tips and tricks the banks won’t always tell you to assist you with paying off your home loan sooner, but also gain an insight into some techniques that will allow you to minimise the interest you pay to the bank.

The Highline Lending Budget Planner

The best way to take control of your finances is to use a budget planner. This is a simple tool that helps you understand the money going in and out of your household. With our Highline Lending Budget Planner, we’ve got you covered. This handy tool allows you to log and track your goals, track your savings, track your debt and expenses and keep a monthly record for an end of year evaluation.