Senior welfare housing (silver homes) to become eligible for reverse mortgage loans

- Starting from July 1, 2010, HF sells Jootaekyeonkeum reverse mortgage loans to owners of senior welfare homes -

From July 2010, senior citizens older than 60 who own a senior welfare home (also called a 'silver home') will become eligible for the Jootaekyeonkeum loan (a government-backed reverse mortgage loan).

On June 28, 2010, Housing & Finance (HF, CEO Joo-jae Lim) announced its plan to offer reverse mortage loans following a revision of the relevant regulations. The decision is expected to increase interest in the reverse mortgage loan among eligible seniors.

HF also determined the level of monthly payments for borrowers based on life expectancy (Korea Statistics, 2005 Life data) and the rate of increase in the value of senior welfare homes (2.3% annually). The general housing (apartment, stand-alone house, multiplex house, row house) interest rate will be applied, i.e. the yield on a 3-month CD plus 1.1%, which is now 3.55% (variable rate). For a senior welfare home valued at 300 million won, a 70-year-old borrower will receive 841,000 won a month while a 75-year-old will receive 1,097,000 won. Compared to the monthly payment for borrowers owning general housing, this is about 20% less than the 1,064,000 won for a 70-year-old and 1,330,000 won for a 75-year-old. The reasons for this lower monthly payment for senior welfare homes are the strict ownership eligibility (60 years or older) and the lack of an active market for this type of housing, which make senior welfare homes relatively less liquid assets. HF plans to regularly monitor changes in the value of senior welfare homes by checking the market environment, transactions, and ownership limitations.

Senior welfare homes that are eligible for the Jootaekyeonkeum reverse mortgage loan are those registered with local governments.HF will announce the list of eligible homes through its website every year. The application procedures and requirements are the same as the reverse mortgage loan for general housing.

Jootaekyeonkeum is a reverse mortgage loan for senior citizens 60 or older who own a home but do not have enough cash income. By putting up their home as collateral, borrowers can receive a monthly payment in the form of an annuity.