http://www.businesstimes.com.sg/arch...cheme-20140311

Published March 11, 2014

BUDGET DEBATE

Govt takes another look at reverse mortgage scheme

It is also extending Lease Buyback option to larger flat types

By Lynette Khoo [email protected]


THE government will revisit reverse mortgage as an option for the elderly to monetise their HDB flats, and extend the Lease Buyback scheme to larger flat types.

Minister for National Development Khaw Boon Wan told Parliament yesterday that reverse mortgage as an option came up during dialogues with the elderly when the low take-up for the Lease Buyback scheme was discussed.

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

Like lease buyback, reverse mortgage is a form of equity release that enables the property owner to age-in-place while unlocking some equity.

"MND has begun a serious study of this option," said Mr Khaw.

The reverse mortgage option was offered between 2006 and 2008 by NTUC Income to flat owners but only 24 households took up the scheme.

A HDB spokeswoman told BT that the low take-up rate could be due to the fact that the elderly were not familiar with the scheme then.

"The payouts determined by the provider, based on its evaluation of the costs and financial risks involved, may not have been sufficiently attractive to the elderly," the spokeswoman said. "There could also have been fear of outliving the fixed tenure of the loan, in which case the owner would have to sell the property to repay the loan."

HDB subsequently launched the Lease Buyback scheme in 2009, which lets homeowners sell part of their lease back to the government.

But the elderly's preference for ageing-in-place and retaining an asset which they can bequeath also stood in the way of the scheme's take-off.

Some 240 seniors signed up for HDB's Lease Buyback scheme last year, after rules were relaxed so more flat owners aged 63 and above could qualify. That is up from a total of 471 households in the preceding four years.

Property consultants note that educating the elderly on the Lease Buyback scheme has been a challenging exercise and there are concerns of outliving the remaining lease of their flats.

Century21 chief executive Ku Swee Yong noted that the scheme could be "misunderstood as the government's taking the homes from them".

He added that if a new reverse mortgage scheme is administered by the government, there may be more confidence in the scheme.

Yesterday, Member of Parliament Foo Mee Har asked if the pent-up demand at the private project The Hillford - touted as Singapore's first retirement resort - was indicative of unfulfilled need for retirement villages in Singapore. She also asked if the government should set aside more land for this purpose.

Mr Khaw felt that "the jury is still out" as the success of this development can only be gauged several years later when it is completed and residents have moved in.

As such, the Urban Redevelopment Authority is in no hurry to push out other sites until it is clear about the outcome, Mr Khaw said. "We shall leave the market to cater to the high income segment of our population."

MND is also studying ways to better support public rental tenants in progressing to homeownership and better provide for the housing needs of vulnerable groups, including divorcees with children.