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Article4_Content
Reply to: Reverse mortgage? More like home loan"(ST July 4 2005)
To The Editor
The Straits Times (Forum)
4 July 2005
I refer to the letter from Christopher Chan entitled "Reverse mortgage? More
like home loan" (ST July 4 2005)
Under a home loan, the borrower takes a large loan to buy a home and repay the
loan in installments over many years. Under a reverse mortgage, the owner
already has a property that is fully paid, and now pledges the property to draw
out a monthly sum to meet the living expenses.
The reverse mortgage is especially suited to a retired person who has exhaused
the personal savings and is left with a property as the remaining asset. This
category is called "asset rich and cash poor".
We charge a slighly higher interest rate on a reverse mortgage to meets the
higher risk and cost of administering the loan. In past years, other financial
institutions were not prepared to offer this type of loan. The margin is not as
atrractive as suggested by Christopher Chan.
NTUC Income offered this facility to start the market. I hope that other
financial institutions will now be prepared to enter and help to develop this
market.
We were not able to provide insurance against the loss in value of the property,
as it is risky and difficult to manage. In the USA, the scheme is runned by the
Government. It is not operated as a voluntary insurance arrangement.
NTUC Income
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