Reverse mortgages may soon be available to asset-rich but cash-poor Singaporeans, says AsiaOne Business in a recent article.
OCBC Bank and NTUC Income began offering such mortgages in 2006 but they were discontinued due to a lack of demand.
But as many retired people in Singapore tend to own their own home, but have a limited income, financial advisors say the reverse mortgage may make a comeback.
“They would provide low-income retirees with ‘a practical and reasonable option,’” SingCapital chief executive officer Alfred Chia tells The Straits Times, as cited by AsiaOne Business. “He noted that there may be some people who live by themselves with no future generations to take care of them so it is ‘always good (for them) to have more options.’”
But the product may be viewed by many as a last resort.
“The uncertainty of living beyond the loan period in a reverse mortgage and being chased out of the house can be quite unnerving,” says Jeff Lee, executive director of Synergy Financial Advisers. “At that age, most people would want to die in their homes instead of being forced to move. They would pawn their homes only if they were really left with no choice — no cash, no money in their CPF, only their property.”
Volatile interest rates may also be a concern for home owners, Chia says, noting that if interest rates spike that could impact the monthly payout and expedite a loan breach.
In addition, many Asians prefer to leave behind assets for future generations, he says.
In Opera Estate in East Coast, for example, there are at least five households receiving social assistance from ComCare, the government’s main fund to help the needy and low-income families. But most of them would not have given a second thought to selling their homes or taking up a reverse mortgage, says Opera Estate’s neighbourhood committee chairman Chris Chen.
While reverse mortgages did not take off previously, Lee says things might change if financial institutions could provide borrowers, especially those who outlive their life expectancy, with “more assurance.”
Read the full article here.
Written by Cassandra Dowell