Retirees with private property can consider a new loan scheme that can release capital from their homes.

Finance firm Hong Leong Finance (HLF) starts offering a programme today that gives retirees cash in the form of a term loan.

The scheme could help retired people with paid-up property who need access to ready cash.

If they own a property outright, they can borrow up to 50 per cent of the real value of the house.

Customers can choose from fixed or variable rate packages.

HLF said it has introduced the new loan following the Govern- ment's move on March 10 to relax loan limit rules under the total debt servicing ratio (TDSR) framework, for owners borrowing against their residential property.

A retiree who does not have a mortgage or one that has been paid down considerably can now borrow against the property without worrying about insufficient monthly income - which was a concern previously under the TDSR regime.

Previously all debt repayments - including mortgage, credit cards and car loans - should not top 60 per cent of monthly income, so it was quite tough for retirees who did not have a monthly income.

Now the home owner's total outstanding loans can be 50 per cent or less of his property's value.

Those who can afford to make early repayments can also apply to do so, to "save on interest cost", said HLF.

Customers must pay an upfront 0.3 per cent fee on the new loan to get this feature, which is renewable every two years, based on approval.

A usual penalty of 1.5 per cent imposed on early repayments will be waived, said HLF.

However, MoneySmart mortgages head David Baey noted this so-called waiver is more of a discount as customers will still have to pay the 0.3 per cent fee.

HLF president Ang Tang Chor said: "Demand to borrow against the value of private residential properties to obtain additional cash is growing. Retirees want flexibility to monetise their properties during their retirement years.

"Their needs lie primarily in improving and enhancing their lifestyle and for meeting specific purposes such as renovating their properties for a much-needed upgrade and paying for their spouses' private medical expenses."

Mr Baey noted that the new loan option would be most helpful for retirees with fully paid properties but no cash on hand, while those who are still refinancing their loans still have to meet the TDSR requirements.

He also noted that the terms of the loan could be clearer.

Mortgage Supermart Singapore broker Keff Hui added that it could be useful for "seniors with minimal income who were previously restricted by TDSR... to support their retirement plans".

And being able to withdraw cash from their fully paid-up private properties means people can hold on to their homes without downgrading, said Mr Baey.

He added: "I believe those in their twilight years would prefer staying in their homes rather than deal with the hassle of moving out."