Reverse mortgage pilot scheme fine-tuned
A reverse mortgage pilot scheme to be launched this year has been fine-tuned, just two months after the plan was announced.
Peter Pang Sing-tong, executive director of the Hong Kong Mortgage Corp, revealed the changes yesterday, and denied the adjustments were made owing to a poor response.
'We have talked with banks, elderly concern groups and found there was room for improvement,' Pang said. A survey last year showed 44 per cent of the elderly believed the scheme could help fund their retirement; 25 per cent were willing to join.
The scheme is a residential mortgage designed for the elderly. They will use their self-occupied and non-mortgaged homes as collateral to apply for reverse mortgage loans with banks, and receive a secure stream of monthly payments. At the same time, the elderly can remain in their home for the rest of their lives. They do not need to repay the loan or pay any interest or mortgage insurance premiums. The banks will dispose of the properties when the person dies to cover the accrued principal, interest and mortgage insurance premium.
In the revised scheme, an eligible 60-year-old property owner with a HK$1 million home could receive a life annuity of HK$2,000 a month until he dies.
Two months ago, the original scheme said the same borrower could only receive HK$1,800 a month. And one who chose another plan would get HK$300 to HK$400 less money than in the revised plan.
In the revised plan, the HKMC fee has been cut from 2 per cent to 0.28per cent of the property's price. It also allows co-borrowers such as a spouse, siblings or unrelated parties, who jointly own the flat, to apply for the mortgage together, but the payments would be HK$200 to HK$500 less than a single borrower.
'The reason is that the chance of the bank having to allow two people to stay in a flat for a longer time [until both people die] is higher than that with a single person,' Pang said.
The HKMC revised the reverse mortgage scheme to pay elderly at least this much more a month, in Hong Kong dollars: $200