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Singapore Budget 2014: Reverse mortgages for elderly HDB flat owners being seriously studied: Khaw

The option of reverse mortgages for elderly Housing Board (HDB) flat owners is being seriously studied by the National Development Ministry (MND). -- ST FILE PHOTO: YEN MENG JIIN
The option of reverse mortgages for elderly Housing Board (HDB) flat owners is being seriously studied by the National Development Ministry (MND). -- ST FILE PHOTO: YEN MENG JIIN

The option of reverse mortgages for elderly Housing Board (HDB) flat owners is being seriously studied by the National Development Ministry (MND).

"It is timely to revisit (the) reverse mortgage as an additional option for our seniors...We hope to formulate a practical scheme for our seniors," said MND Minister Khaw Boon Wan in Parliament on Monday.

Reverse mortgages are loans taken up by the owner using his property as collateral, and repaid with interest upon termination or death, typically from the sales proceeds.

Reverse mortgages have been tried before by NTUC Income, but did not quite take off, Mr Khaw noted.

Many senior citizens had suggested this option during last year's Our Singapore Conversation sessions. They preferred it because it allows them to unlock some equity while still enabling them to age-in-place, he said.

Under the Enhanced Lease Buyback Scheme, which is similar, a senior sells part of his or her flat's lease to HDB and retains a 30-year lease. The net proceeds are then used to top up their Central Provident Fund (CPF) Retirement Accounts.

But this scheme has had a low take-up rate of 390 between 2011 and 2013. According to the elderly discussants, this could be because they preferred to age-in-place as well as retain an asset which they can bequeath.

The two other options for seniors who want to convert part of their HDB flat into cash are switching to a smaller flat or renting out a vacant room, noted Mr Khaw.

In the last three years, 5,600 elderly households booked Studio Apartments. Another 390 took up the Lease Buyback Scheme. Since 2013, 70 topped up their CPF Retirement Accounts when they switched to a smaller flat, receiving a Silver Housing Bonus of up to $20,000 in cash.