Reverse Mortgage Loan Blog

Kim Han-jin, a 70-year-old retiree who worked for a local carmaker, recently ran out of money, having used up his severance bonus over the past 10 years.

In order to survive, he decided to use his only asset, an apartment in Seoul priced at some 900 million won, but he wants to live there for the rest of his life with his wife.

The solution he found is reverse mortgaging. And the time could not be more opportune, as the government seeks to enhance the upper limit of monthly payments of lifetime house loans.

“Beginning this May, we plan to substantially raise the ceiling of reverse mortgage compensation,” Financial Services Commission (FSC) director Choi Hoon said Wednesday.

“Kim will be able to get as much as 3.2 million won every month under the new format, which is much more than the previous limit of two million won,” he said.

The minimum age for people to receive reverse mortgages will also be brought down to 60, from the current norm of 65. Both steps require the revision of the relevant FSC decrees.

A reverse mortgage is a loan available to seniors and used to release home property equity as a lump sum or in multiple payments.

The homeowner’s obligation to repay the loan is typically deferred until he or she dies. In other words, banks will take the home in return for providing money in one’s later years.

Choi said that the measure will help the aged, typically more vulnerable to economic downturns.

“As the number of senior citizens increases at a fast pace, we need to come up with policies designed to deal with the negative effects of an aging population,” Choi said.

“The new reverse mortgage system will work as a kind of security net for the old here, helping them endure the lingering financial crisis,” he said.

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