Reverse mortgage plan pushed for retirees

Top News | Stella Zhai 9 May 2019

The Hong Kong Mortgage Corp launched its first reverse mortgage product on life insurance policies, targeting retirees.

The Policy Reserve Mortgage Program is introduced as part of HKMC retirement solutions that allow borrowers to draw loans using their life insurance policies as collateral.

In general, borrowers can opt to receive monthly payouts either over a fixed period of time or throughout their lifetime and do not need to pay back the loans.

After the retirees pass away the lenders will pay the amount with the recovered value from death benefits of the backed life insurance policy.

Retirees may also borrow lump-sum payouts for specific purposes when needed.

Applicants are required to be aged 60 or above, and have fully paid their mortgaged life insurance policies. Additionally, the maximum aggregate amount of death benefits of life insurance policies pledged is limited to HK$15 million.

Retirees who draw this loan can opt to receive monthly payouts in 10, 15, and 20-year periods or receive them throughout their lifetime.

Interest is counted under a floating annual interest rate, or a fixed interest of 4 percent annual interest for the first four years and 2.5 percent per year after that.

As an example, someone who is aged 65 and has a policy of HK$2 million can - under the life-long term - receive a monthly payout of HK$2,793 under the floating rate term, or HK$3,157 under the fixed rate plan.

"The 4 percent fixed annual interest rate is not too expensive and is highly preferred," said HKMC executive director and chief executive Raymond Li Ling-cheung, noting that 70 percent of clients have chosen this plan.

Li added that hospice care costs in Hong Kong will increase six-fold to HK$222.4 billion in 40 years, according to a joint study by Sau Po Centre on Ageing at The University of Hong Kong, The Women's Foundation and HSBC Life.

The number of elderly aged 65 or above and in need of care is expected to grow 2.6 times to 890,000 by 2060.

"In recent years, since launching the Reverse Mortgage Program and the HKMC Annuity Plan, the plans have helped over 10,000 Hongkongers turn their assets amounting to over HK$20 billion into a stable stream of income to support their retirement," Li added.

The Policy Reserve Mortgage Program would provide retirees with an "immediate, stable and lifelong" stream of income to improve quality of life.

The Policy Reserve Mortgage Program will be open for application on May 30. HKMC also announced to raise the maximum premium amount per person on the HKMC Annuity Plan from HK$2 million to HK$3 million today. Li pointed out a quarter of applicants have already purchased the annuity at the upper limit.

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