Reverse mortgages in Korea may be more positioned for a boom market with applications currently “surging” at the highest level in six years, reports Bloomberg News.
In Korea, the JooTaekYeonKeum, or “housing pension” is available to homeowners who are at least 60 years old and have their mortgage paid off in full. An older population expected to skyrocket as well as a population that is largely unprepared for retirement will lead to an increase in the use of the loans, according to the report.
“Applications for reverse mortgages [in Korea], which are typically taken out by elderly or retired homeowners who borrow money in the form of monthly payments against the equity in their homes, are surging to the highest in six years. Loans backed by state- run financing firm Korea Housing Finance Corp. jumped 71 percent in 2012 as retirees like Kim sought a steady income in a nation wracked by personal debt, falling home values and a rapidly aging population.
As more South Koreans in their 50s are retiring without accumulating much fortune but a single house, the reverse mortgage is becoming the last resort for the retirees,” said Park Won Gap, the senior real-estate market analyst at Kookmin Bank, South Korea’s biggest lender by assets. “The fear of a further slide in home prices is encouraging them to take that option which has been a foreign idea to them. As not many people expect a bull real estate market any time soon, the reverse mortgage origination will inevitably increase….”
Read the full article at Bloomberg News.
Written by Elizabeth Ecker