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Govt begins serious study on reverse mortgages

SINGAPORE — The Government has begun a serious study on reverse mortgages as a means for elderly Singaporeans to retire comfortably, said National Development Minister Khaw Boon Wan in Parliament yesterday.

MND's plans for FY14. Graphic: Rodolfo Pazos

MND's plans for FY14. Graphic: Rodolfo Pazos

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SINGAPORE — The Government has begun a serious study on reverse mortgages as a means for elderly Singaporeans to retire comfortably, said National Development Minister Khaw Boon Wan in Parliament yesterday.

Speaking at the Committee of Supply (COS) debate for the Ministry of National Development (MND), Mr Khaw said it was “timely to revisit (the) reverse mortgage as an additional option for our seniors”.

During the Our Singapore Conversation exercise, some elderly Singaporeans had called on the Government to offer reverse mortgages and expressed their wish to age-in-place, that is live in a residence of their choice, and retain an asset that they could bequeath, said Mr Khaw. Reverse mortgages allow homeowners to pledge their property for a sum, which then provides a regular monthly income.

The minister also said the MND was reviewing the Enhanced Lease Buyback scheme to see if it could be extended to larger flat types, as suggested by several Members of Parliament (MPs).

The scheme allows the elderly to sell part of their flat’s lease back to the Housing and Development Board (HDB).

Both schemes would allow senior homeowners to keep their homes and unlock some of the equity from their property.

In 2006, the Government allowed HDB homeowners to take up reverse mortgages. At the time, NTUC Income was the only financial institution to offer the product to elderly Singaporeans. Unlike conventional mortgages, however, homeowners do not need to repay a reverse mortgage until they die or sell their home.

This financial option for HDB homeowners was axed a few years back due to cool demand, while the lease buyback was introduced in 2009 and later enhanced.

Analysts TODAY spoke to welcomed the return of reverse mortgages for HDB homeowners, but the process of helping senior citizens understand how it works could be a “long and arduous” one, said Mr Ku Swee Yong, Chief Executive of Century 21.

“First, we must account for the fact that their average education level is lower. Second, are we able to explain these packages effectively in dialects to them?” he asked.

Many senior citizens want to bequeath their homes to their children, but they need to be educated on the differences between the reverse mortgage and lease buyback schemes, said Mr Chris Koh from property consultancy Chris International.

Although the elderly would be able to keep their homes if they repaid their reverse mortgage loan, the flat’s lease is effectively sold to the Government under a lease buyback scheme, said Mr Koh.

Meanwhile, several MPs rose to express concern over housing options for vulnerable groups during the COS debate yesterday. MP (Nee Soon GRC) Lee Bee Wah suggested that the ministry remove all forms of waiting period for divorcees with children, while MP (Marine Parade GRC) Seah Kian Peng said it should seek the local Community Development Council’s input when evaluating an applicant’s housing needs.

In response, Mr Khaw said the Government has begun to focus on helping those in vulnerable groups, especially divorcees with children, given that the backlog of first-time applicants for Build-To-Order HDB flats has been cleared.

The ministry will study Dr Lee’s and Mr Seah’s suggestions and will continue to exercise flexibility and compassion whenever it receives worthy cases from MPs, said Mr Khaw.

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