An exit strategy is required where:
- The income required to service the loan is earned by your client that is 50 years or older at the time of application, and
- They either intend to retire or will be 70 years or older prior to loan term maturity.
Refer to the following circumstances:
- Individual applicant who is both:
- 50 years old (or older) at application and
- Will be 70 years old (or older) at loan maturity*.
- Joint applicants in a spousal relationship where any income required to service the loan is earned by an applicant who is both:
- 50 years old (or older) at application and
- Will be 70 years old (or older) at loan maturity*.
- Joint applicants in a non-spousal relationship where any applicant (regardless of if their income is required to service the loan) is both:
- 50 years old (or older) at application and
- Will be 70 years old (or older) at loan maturity*.
*Or has advised an intention to have retired prior to loan maturity.
Assessing downsizing exit strategy
The following principles are used when assessing downsizing exit strategy:
- the property intended to be purchased is assessed at current market value
- the applicant needs to be able to purchase the new property and extinguish all debt on the existing property
- the loan size can be assessed at the amortised value at the point in time they intend to downsize, based on minimum contractual repayments
- no capital growth should be assumed in the property they are selling
- care is required where the loan is secured by an owner-occupied property which is the applicant’s main asset
- exit strategy plan, is detailed including the above and showing timeframe, purchase price and location, and aligns with the applicant’s requirements and objectives.