Critics of Hong Kong’s decision to offer reverse mortgages starting in 2011 say it can never be a substitute for a long awaited comprehensive retirement plan.
Speaking at RTHK’s City Forum, Elderly Commission chairman Dr Leong Che-hung said one of the major problems with the reverse mortgage scheme would be that elderly people who outlived the mortgage period would no longer receive monthly annuity payments.
The pilot scheme for reverse mortgages, announced by the Hong Kong Mortgage Corporation this month, would enable the elderly to use their self-occupied and non-mortgaged homes as collateral for reverse mortgage loans in return for annuity payments while they continued living in those residences.
Eligible borrowers – aged 60 or above – could choose to receive monthly annuity payments over a fixed period of 10, 15 or 20 years or over their lifespan.
“Some elderly people may choose to receive monthly annuity payments in smaller amounts for a longer time. But would these be enough to make ends meet?” Leong said. “In principle, the option of a reverse mortgage, which has been implemented in different places overseas, can be considered. But its details really need to be worked out carefully.”
He also warned of possible family disputes when family members did not agree to use the owner-occupied home of an elderly person as collateral for a reverse mortgage loan.