More Seniors to Get Pension Through Reverse Mortgage
January 27, 2009
The financial regulator plans to expand a housing-based pension plan, or reverse mortgage, to help more senior citizens lead stable lives after retirement and help the economy.
The Financial Services Commission (FSC) said it is considering easing conditions for the reverse mortgage subscription. Currently, those aged 65 or older with only one home worth 900 million won or less can provide their home as collateral to the Korea Housing Finance Corp. (KHFC) or local banks for monthly payment for the rest of their lives.
The commission is considering expanding the program to people aged 60 or 55.
It is also planning to increase the sum subscribers get for the rest of their lives to over 500 million won. Currently, subscribers can get only up to 300 million won in reverse mortgages.
The program was introduced in July 2007, modeled after the U.S. system, but attracted only 515 subscribers in 2007 and 695 last year. The regulator concluded that strict conditions, including age, made the program less popular.
``We deemed that the program should be expanded given the economic recession and early retirement following corporate restructuring,'' the spokesperson said.
According to a survey last year by the KHFC, subscribers get an average of 945,000 won per month in mortgage-backed pensions, 76 percent of their total monthly income.
Most of the subscribers said they chose the program as they didn't want to be a burden on their children and as they had no other retirement plans. They were 74 years old on average, and the house they provided as collateral were valued at 241 million won on average.
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