The Hong Kong Mortgage Corp (HKMC) is to launch a reverse mortgage pilot scheme next year after its survey indicated four in every 10 elderly support the concept.
The scheme will enable the elderly to use their self-occupied and non-mortgaged homes as collateral for reverse mortgage loans in return for a stream of annuity payments while living at the residence. Eligible borrowers - aged 60 or above - can choose to receive monthly annuity payments over a fixed period of 10, 15 or 20 years or over their lifespan.
The HKMC estimated that an eligible 60-year-old property owner could receive about HK$1,800 a month based on a home valued at HK$1 million, which will be determined by registered surveyors.
The same borrower, however, would get a monthly HK$3,300 for a 10-year term annuity payment or HK$2,500 in 15 years and HK$2,100 in 20 years. They can stay in the flat after the end of the reverse mortgage until they die. They can borrow the equivalent of 40 to 50 per cent of the property's appraised value.
'We hope that with the introduction of reverse mortgages, elderly people can have an additional way of obtaining a steady cash flow to improve their standard of living while staying in their own home,' said Peter Pang, the executive director of the HKMC.
The HKMC said flats valued up to HK$8 million would be eligible and homes older than 50 years would be considered on an individual basis.
The lender will repossess and sell the underlying property only after the death of all borrowers of a reverse mortgage.