Consider reverse mortgage scheme to give retirees another option

I, too, hope that retirees use the lease buyback scheme as a last resort. The concerns about ageing and being asset-rich but cash-poor are real, though. (“Sad if success of buyback scheme based on higher take-up rate”; Aug 22)

When the crunch comes, the options are few. And one option not mentioned at the National Day Rally is that of reverse mortgages, although it was said in Parliament in March that the Government is conducting a serious study.

By mortgaging the flat to a bank, instead of using the lease buyback scheme, owners would also receive a steady stream of cash payments to see them through their winter years.

I think the Monetary Authority of Singapore should supervise such a scheme to ensure adequate protection for both the banks and retirees, and that it is financially viable, based on a win-win situation for both parties.

For example, in the event of the mortgagor’s death, the mortgage instrument could allow the beneficiary of the property to continue receiving the monthly payments until the mortgage ends.

The beneficiary should also have an option to redeem the mortgage by settling the amounts disbursed plus accumulated interest to regain the property. This ensures that dependents are not left without a roof over their heads.

The scheme should allow only retirees, and not the young, to mortgage their flats. It should not allow the banks to own the flats or force a sale at the expense of the owner.

The bank should sell the flat to a Singaporean in the open market upon the expiry of the mortgage. And any surplus from the sale should be paid to the mortgagor or the beneficiary.

If the bank cannot get a buyer, it would have the option to sell the flat to the Housing and Development Board. Importantly, the reverse mortgage scheme would help soak up market liquidity and give the domestic economy a boost.