"JTYK users prefer the fixed amount option"

- 5,730 seniors signed up for the fixed amount option after its release…

on average, 73 years old and KRW 1.03 million per month –

The total number of JTYK users exceeded 5,700 in four years after its release. And it is shown that they prefer the tenure payment (fixed amount) option.

The Korea Housing Finance Corporation (HF, CEO Joo-jae Lim) announced on July 18 that since JTYK, a program for senior citizens to receive monthly pensions in their golden years by putting up their houses as collateral, was launched on July 12, 2007, on average, 5.7 persons have joined the program a day and a total of 5,730 seniors are paid as of July 11, 2011.

The figure is 62 percent higher than the U.S. Home Equity Conversion Mortgage (HECM), which was used as a benchmark for JTYK, had 3,529 loans taken out in four years after its release (October 1989). "Even though the perception of homes as inheritance and parents' dependence on the financial support from children are relatively lower in the U.S., reverse mortgage loans are expanding at a much faster rate in Korea," said a HF official.

JTYK is fast taking roots as the means of securing income in old age because the percentage of senior citizens enjoying public pension benefits is low and seniors failing to prepare themselves for old age due to family support and child education want to ease their children's financial burden of supporting them by joining the JTYK plan.

A HF official predicted, "Given that the elderly should monetize their assets to cover living expenses in old age, the number of senior citizens joining JTYK which guarantees lifetime residence and lifetime payment will continue to increase significantly."

Meanwhile, an analysis of JTYK loans in the last four years after its release shows that the average age of borrowers is 73 years old (for couples, the age of the younger spouse), 13 years older than the minimum age requirement for the JTYK plan (60 years old). By age, ▲ seniors aged 70-74 take up the largest share with 28.6 percent (1,639 cases), followed by ▲ those aged 75-79 at 23.3 percent (1,337 cases), ▲ those aged 65-69 at 21.9 percent (1,253 cases), and ▲ those aged 80-84 at 12.4 percent (711 cases). And those aged 90 or above account for 0.8 percent (44 cases).

There are a total of 124 cases in which a spouse inherited the JTYK plan after the death of a borrower according to the principle of "Lifetime guarantee for a spouse". If, after the death of JTYK users, children give up the inheritance and transfer the ownership to the spouses of the subscribers, they will inherit the JTYK plan and enjoy the same benefit as the subscribers for the rest of their lives.

The average value of collateralized houses is KRW 274 million. By home equity value, 30.6 percent (1,751 cases) are ▲ between KRW 100 million and KRW 200 million, 23.7 percent (1,357 cases) are ▲ between KRW 200 million and KRW 300 million, 15.0 percent (858 cases) are ▲ between KRW 300 million and KRW 400 million, 10.8 percent (618 cases) are ▲ below KRW 100 million, 8.4 percent (483 cases) are ▲ between KRW 400 million and KRW 500 million, 5.9 percent (337 cases) are ▲ over KRW 600 million, and 5.7 percent (326 cases) are ▲ between KRW 500 million and KRW 600 million. And as many as 16 owners of the houses valued at KRW 900 million, the highest level under the current reverse mortgage system, signed up for the program.

The average monthly payment is KRW 1.03 million. By monthly payments, 39.4 percent (2,257 cases) are ▲ between KRW 500,000 and KRW 1 million, 20.5 percent (1,178 cases) are ▲ between KRW 1 million and KRW 1.5 million, and 20.4 percent (1,168 cases) are ▲ below KRW 500,000. Besides, 7.2 percent (410 cases) are between KRW 2 million and KRW 3 million and 2.2 percent (128 cases) are over KRW 3 million.

Monthly payments vary depending on applicants' age and home values. Ms. Lee aged 79 living in Yeongdeungpo-gu, Seoul is paid out the highest monthly payment of KRW 4.678 million by putting up her apartment valued at KRW 835 million as collateral. By contrast, Mr. Lee aged 62 living in Suncheon-si, Jeollanam-do, is paid out the lowest monthly payment of KRW 92,000 after withdrawing a lump sum of KRW 13.9 million by putting up his detached house valued at KRW 75 million as collateral.

Meanwhile, the first subscriber to JTYK Mr. Lee aged 77 living in Seo-gu, Ilsan, Goyang-si, has been paid out a total of KRW 98.38 million over the last 48 months with the monthly payment of KRW 2.0496 million starting from July 2007 and Ms. Cho aged 95 living in Mapo-gu, Seoul has been paid out a total of KRW 154 million, the highest level in total amount. Besides, there are 16 subscribers who received a total of over KRW 100 million.

As to the composition of subscribers, ▲59.3 percent (3,400 cases) are couple households. This is followed by ▲single-female households at 32.5 percent (1,861 cases) and ▲single-male households at 8.2 percent (469 cases), showing that there are four times more single-female households than single-male households. This is because of women's longer lifespan and lack of economic self-sufficiency.

By the location of collateralized houses, the Seoul Metropolitan area (Seoul, Incheon, Gyeonggi-do) accounts for 77.1 percent (4,417 cases) and the non-Metropolitan region makes up 22.9 percent (1,313 cases). JTYK subscription in the non-Metropolitan region has been on the rise from 20 percent in 2008 ▲ to 21.4 percent in 2009 ▲ to 23.3 percent in 2010 ▲ to 24.9 percent in 2011 (as of July 11).

By looking at Seoul (2,048 cases), Nowon-gu takes up the largest share with 13 percent (266 cases) and Geumcheon-gu and Jung-gu make up the lowest with 1.1 percent (22 cases) each. By looking at three gus of Gangnam (Seocho-gu, Gangnam-gu, Songpa-gu) showing relatively expensive housing prices, their share of JTYK subscription has been on the rise every year from 3.3 percent (11 cases, July 2008) to 6.8 percent (47 cases, July 2009) to 9.3 percent (107 cases, July 2010) to 10 percent (204 cases, July 2011).

By type of housing, apartments take up the largest share with 81.3 percent (4,661 cases), followed by ▲ detached houses at 10.5 percent (603 cases), ▲ multi-family houses at 3.9 percent (224 cases), and ▲ row houses at 3.4 percent (194 cases). In terms of home size, 78.3 percent (4,485 cases) are the national housing size (85㎡) or smaller.

In terms of pension payment, 60 percent (3,437 cases) opt for the tenure payment program where a fixed amount is paid out each month without any lump-sum payment. This figure is 1.5 times higher than the mixed tenure payment program (40 percent, 2,293 cases) where lump-sum withdrawals are allowed within a certain limit for medical and wedding costs. By monthly payment option, the fixed amount option where the same amount of money is paid out for life takes up the largest share with 76.3 percent (4,372 cases), followed by ▲the decrease option where the monthly payment decreases by 3 percent every year at 22.7 percent (1,299 cases) and ▲the increase option where the monthly payment increases by 3 percent every year at 1.0% (59 cases).