SINGAPORE - DBS launched its new Home Equity Income Loan on Monday (Aug 16) to help seniors use their fully paid private homes to boost their retirement income.
This is an illustration of how it works:
Married couple Mr Lee, 70, and Mrs Lee, 65, have a fully paid up condominium unit. They want to have retirement incomes of $1,300 per month each.
But now, Mr Lee only has $650 through his Central Provident Fund (CPF) Life payouts, and Mrs Lee has $450. Mr Lee will need $650 more and Mrs Lee $850 more.
First, to take the loan, the equity value of their home will be assessed.
Then, the loan amount will be calculated to help them reach their desired CPF Life payouts. In this case, Mr Lee needs $115,000 and Mrs Lee $175,000, so they need to borrow $290,000 in total.
Once the loan is approved, they will get the top-up amounts in their respective CPF Retirement Accounts. They then apply to the CPF Board to increase their CPF Life payouts.
After 30 years, they will have to pay back $540,560, including the 2.88 per cent interest a year.
Perhaps they will then be ready to sell their condo home, since Mrs Lee will be 95 years old. The proceeds from the flat can then be used to pay the lump sum of the loan.