My comments on Reverse Mortgage - Sunday Times 12 Mar 2006

Post by **Dennis Ng** » Fri Sep 15, 2006 7:27 pm

Sunday Times ran an article on Reverse Mortgage entitled "Earn cash on your home when you retire."

Below are my comments publisehd in this article for your easy reference:

According to Dennis Ng of http://www.HouisngLoanSG.com before a person decides whether to take up Reverse Mortgage to supplement their retirement income, he should seriously consider the risk factors of a reverse mortgage.

1. Risk of property value fluctuation
If the flat decreases in value, NTUC Income may cease the payout if the outstanding sum exceeds 70% of the value of the property. I have come across people who took up reverse mortgage on private properties a few years ago who were caught by surprise when NTUC Income informed that she only can continue drawdown on the property for about 1 year compared to original projection of another 10 years or so.

2. risk of interest rates fluctuations. NTUC Income is charging promotional interest rate of 5% currently however interest rate is subject to changes in future. If interest rtes were to move up to 6% or 7%, the payout might also be much shorter than projection based on interest rate of 5%.

3. The HDB flat must have at least a remaining tenure of 50 years. Therefore, you might not even qualify for this reverse mortgage scheme if you stay in a HDB flat close to 40 years old.

4. Maximum payout till age 90. If you are blessed with longevity, you might face the unenviable position of being without a roof over your head.

A simpler way for a person to ?encash? their property if he/she is staying in a 4-room Flat or 5-room flat perhaps is to rent out 1 or 2 of the bedrooms instead. They can easily get a rental income of more than $500 which is higher than the $480 per month that the reverse mortgage offers. What?s more? At the end of 20 years, if you are alive, you can continue renting out the room beyond age 90. For elderly, it might also be good not to stay alone as in times of emergency, perhaps your tenant can even be there to save your life.