Reverse Mortgage

Greetings, Mr. Tan,

I am currently doing a research on reverse mortgages in Singapore. I hope that you can help me with the answers to the following:

1. Whi is reverse mortgages not popular with Singaporeans and financial institutions?
2. How is NTUC Income able to provide RM while the banks are sitting back?

REPLY

When I was head of NTUC Income, I took the following view:

1. It is safe to lend money on the mortgage of a property
2. We can lend out a small monthly sum and allow the interest to accumulate with the loan
3. We can project the accumulated borrowings and compare it with the value of the property.
4. We will aim to keep the value of the borrowings to be less than 70% of the projected value at a future date, when the borrower is likely to repay the loan, e.g. on death or sale of the property
5. If the property reaches the 70% threshold earlier, for example due to a drop in property value, we will stop the lending and ask the borrower to repay the loan within 6 to 12 months.

NTUC Income was able to give out a few hundred reverse mortgage loans over a period of 10 years. There were only a small number of cases, where the owner had to sell the property prematurely, due to a collapse in the property value.

I believe that the market for reverse mortgage can be developed in Singapore. I hope that the other financial institutions will enter into this market.

Why were they not interested? Perhaps they feel that the market is too small at this time and will wait for it to be developed. Perhaps, they feel that the risk is difficult to manage (which is not the case, in my opinion).

All the best in your research.