www.shaproperty.com

(SINGAPORE) Catering to the needs of Singapore's ageing population, OCBC Bank has become the first bank here to offer reverse mortgage loans, joining pioneer, NTUC Income, which has been offering such loans for several years. A reverse mortgage is a special type of loan homeowners can take against their home, which enables them to convert their home-equity into cash.

'We have no immediate plans to introduce reverse mortgage packages.' - Tan Chia Seng, Citibank Singapore's business director for secured assets group

Other banks here have no immediate plans to offer reverse mortgages - and some bankers think there is not much demand for the product.

Tan Chia Seng, Citibank Singapore's business director for secured assets group, said: 'As our existing suite of mortgage offerings meets the needs of our customers, we have no immediate plans to introduce reverse mortgage packages.

'The feedback from our regular conversations with customers, either directly or via market research, indicates that customers who may have a need to unlock the cash value of their properties usually prefer to do so by downsizing to smaller properties.'

Koh Kar Siong, managing director of secured loans at DBS Bank, said: 'We have been monitoring the development and business opportunity closely. There are currently more popular alternatives available to the older homeowners who require cash.'

Mr Koh said older homeowners can, among other things, consider taking out mortgage term loans, downgrading their property, sub-letting or renting.

Kevin Lam, head of the loans division at United Overseas Bank, said: 'We will monitor the demand for reverse mortgages.'

NTUC Income, which introduced a reverse mortgage scheme for private properties in January 1997, has about 350 reverse mortgage policy-holders for private properties. In March, following the government's announcement to allow HDB flat owners to obtain reverse mortgages, NTUC Income started to offer such mortgages for HDB flats. And so far it has approved 10 such mortgages for HDB flat owners.

Melissa Yam, senior manager at NTUC Income, said: 'Reverse mortgages allow our customers to continue to stay in their homes, enjoy capital appreciation on their property and help them cover day-to-day expenses.'

OCBC's scheme is for private properties, and there are term-based and annuity-linked options.

For the term-based option, customers receive a monthly payout for up to 25 years or when they reach 90 years of age, whichever is earlier. The bank has the right to sell the property at the earlier of the end of the term of the loan or when a customer reaches 90.

Those concerned about outliving the payouts can choose the annuity-linked option, under which monthly payouts continue until death.

The term-based and annuity-linked options are priced at annual interest rates of 5 per cent and 4.88 per cent respectively. These rates are not guaranteed and can change over time, depending on how interest rates here move.

Taking the maximum financing quantum of 70 per cent on a property valued at $500,000 and free of encumbrances, the monthly payout is $823 for a 20-year loan. Using the same example, the monthly payout is $670 during the first 10 years and $557 subsequently under the annuity option.

'We recognise that with longer life expectancy, many senior citizens are concerned about the rising cost of living and reduced income streams during retirement,' said Gregory Chan, head of consumer secured lending at OCBC, who sees reverse mortgage loans providing an additional option for senior citizens.

'We don't see a big influx into reverse mortgages,' he said. However, he believes the time is right to launch the reverse mortgage product because there is now greater awareness of retirement planning. Mr Chan thinks reverse mortgage loans can be useful for Singaporeans who are asset rich but cash poor. To be eligible for a reverse mortgage loan from OCBC, applicants must be Singapore citizens or permanent residents, aged 65 years and above and must own or co-own a private property with a remaining lease of at least 45 years at the end of the loan tenure.

Customers who might want to change their mind about reverse-mortgaging their property can unwind the arrangement by repaying the bank in full the money received from the reverse mortgage. A penalty fee of $500 is payable should this happen in the first five years of the reverse mortgage.