Reverse mortgage, as its name suggests, is a loan arrangement that enables property owners aged 55 or above to use their self-occupied residential properties in Hong Kong as security to borrow from a participating bank, and receive regular monthly payouts. Reverse mortgage provides the borrowers with a financially stable lifestyle as, in general, they are not required to repay their reverse mortgage loan during their lifetime.
Worldwide Reverse Mortgage at a Glance Reverse mortgage and similar products are gaining popularity worldwide. Countries with a more established reverse mortgage system include the United States (over 20 years), Canada (over 20 years), the United Kingdom (over 30 years) and Australia (over 30 years). South Korea (since 2007) and India (since 2008) are the Asian countries that launched their own reverse mortgage system fairly recently.
After retirement, you will no longer receive a regular income. Reverse mortgage is one of the care-free financial solutions for you. According to a research on reverse mortgage in December 2010 by Sau Po Centre on Ageing at the University of Hong Kong, out of 1,005 senior citizens aged 60 or above, 66% said they do not have any financial plan for their retirement, and 22.2% of them do not have any children or grandchildren to financially support them. In light of the recent social trend of late marriage and low birth rate, mortgaging your property for monthly payouts is a good retirement option.
For a property valued at HKD1 million, the amount of monthly payout is:
One 55-year-old borrower: HKD3,200 (10-year payment term), HKD2,400 (15-year payment term), HKD2,050 (20-year payment term), or HKD1,650 (lifelong)
Two 55-year-old borrowers: HKD2,800 (10-year payment term), HKD2,150 (15-year payment term), HKD1,800 (20-year payment term), or HKD1,450 (lifelong)
Online Reverse Mortgage Calculator and Maximum Specified Property Value for Payout Calculation:
www.hkmc.com.hk/eng/online_tools/reverse_mortgage_programme/reverse_mortgage_calculator.html The Advantages of Reverse Mortgage One of the characteristics of reverse mortgage is its flexible payment term. The borrower can choose to receive monthly payouts for either the entire life or a fixed period of 10, 15 or 20 years. The amount of monthly payout depends on the borrower's age, the value of the mortgaged property and the payment term. Generally speaking, the older the borrower is and the shorter the payment term, the higher the amount of the monthly payout. Better still, reverse mortgage is open for application by single borrower or co-borrowers. In addition, the borrower may apply for reverse mortgage at a specified value lower than the appraised value of the property, so as to enjoy a regular monthly income while retaining the possibility of saving part of the property's value for his/her inheritor.
One of the greatest advantages of reverse mortgage is that the borrower, under normal circumstances, does not need to repay the outstanding loan he/she owes to the bank during his/her lifetime, and that the borrower is still entitled to continue residing in the property for the rest of his/her life. When the borrower passes away, the bank will proceed with the repayment arrangement. The borrower's inheritor can choose to redeem the property by repaying the bank the full amount of outstanding loan, or sell the property to repay the loan. Otherwise, the bank will sell the property to recover the outstanding loan. In the case where the sale proceeds from the property exceed the amount of the outstanding loan, the bank will return the surplus to the inheritor. Yet, if there is a shortfall, the inheritor can rest assured that the shortfall will be borne by The Hong Kong Mortgage Corporation Limited (HKMC)* under an insurance arrangement between the participating bank and the HKMC.
To further safeguard the rights of the borrower, the reverse mortgage's six-month cancellation period allows the borrower to be given a refund and waiver of all mortgage insurance premiums if he/she wishes to terminate the loan, provided that he/she notifies the bank within the first six months and thereafter fully repay the outstanding loan amount.
Reverse mortgage is by no means the only way that provides you with a stable source of income during your retirement, so be sure to consult a professional financial advisor. For more details, please visit HKMC website on reverse mortgage:
www.hkmc.com.hk/eng/our_business/reverse_mortgage_programme.html, or ring their hotline on (852) 2536 0136.
* The Hong Kong Mortgage Corporation Limited is wholly owned by the Hong Kong Special Administrative Region (HKSAR) Government through the Exchange Fund.
Special Thanks:
The Hong Kong Mortgage Corporation Limited
