Banks should reintroduce reverse mortgages because it could ease the financial woes of asset-rich, cash-poor Singaporeans during their retirement, while allowing them to live in their own home, according to financial advisers in media reports.
In 2006, NTUC Income and OCBC Bank introduced this type of loan, but they were axed due to low demand. Although figures from the latter were not available, NTUC Income is still servicing reverse mortgages for 10 HDB and 38 private homes.
Another reason is it provides more monetisation options, given that HDB homeowners can apply for a similar arrangement through the Lease Buyback Scheme, while those who live in private properties cannot.
Reverse mortgage would provide low-income retirees with “a practical and reasonable option”, said SingCapital CEO Alfred Chia. There may be some Singaporeans who live by themselves without anyone taking care of them, so it is ideal for them to have more options.
However, this scheme is viewed as a last resort, said Synergy Financial Advisers’ Executive Director Jeff Lee: “The uncertainty of living beyond the loan period in a reverse mortgage and being chased out of the house can be quite unnerving.”
He added, “At that age, most people would want to die in their homes instead of being forced to move. They would ‘pawn’ their homes only if they were really left with no choice – no cash, no money in their CPF, only their property.”
Basically, those who apply for a reverse mortgage receives money from a bank on a pre-defined period based on the market value of their home. They are also allowed to live in the house, but at the end of the stipulated period the bank sells the property to recover the loaned amount plus interest. This also applies when the owner dies, moves out or sells the home.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
