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REVERSE mortgages on HDB flats were finally given the green light last month after years of lobbying by MPs, but the immediate response to the idea has not been overwhelming.

Income, the only lender to offer reverse mortgages so far, has signed up just three customers after about a month, as those targeted by these loans feel the terms fall short of their expectations.

A reverse mortgage typically involves an elderly person pledging his property for a sum of money, with which he buys an annuity that provides a regular monthly income.

Elderly flat owners who are interested in the scheme say it is useful to supplement their living expenses, but that current rules are too strict, and the amount of money available is too little.

Retiree Peter Tan, 68, a four-room flat owner who attended an Income public seminar on reverse mortgages on Saturday, said: ‘Based on (Income’s) sums, I will get three, four hundred a month.

‘Nowadays, a bowl of noodles already costs $3. How is that enough money for me and my wife to live on?’

About 300 elderly flat owners had turned up at the seminar, asking questions such as whether the loan amount could be higher, and if Income can relax its requirements.

Currently, Income’s reverse mortgage is available to flat owners aged between 70 and 90, who have paid up more than 90 per cent of their housing loans. The loan amount, which can be up to 70 per cent of the flat’s value, is paid monthly through an advance.

Based on Income’s annual interest rate of 5 per cent on reverse mortgages, an HDB flat valued at $240,000 can generate a monthly advance of about $380 over 20 years.

Various MPs had called for the introduction of reverse mortgages over the years, arguing that as most older Singaporeans have their savings locked up in their flats, such schemes can help them turn their assets into cash.

Mr Chay Wai Chuen (Tanjong Pagar GRC), who first proposed such a scheme back in 1988, felt the lukewarm response to reverse mortgages so far is likely because it is an unfamiliar concept to most of the elderly.

‘I do feel also that the interest rate Income is charging now is too high. If they can reduce the interest rate by half, the monthly payout would be much more attractive.’

Dr Lily Neo (Jalan Besar GRC) agreed, pointing out that $380 a month for a couple may be too little to live on.

Dr Neo added that other rules - such as the minimum age requirement of 70 and requiring at least 90 per cent of the housing loan to be paid up - could be relaxed so more people can apply.

In response, Income CEO Tan Kin Lian agreed the rules can still be tweaked to make them more attractive.

For instance, he said Income is willing to be flexible and approve a loan for a couple if just one person is past 70, while the person’s spouse is in his or her 60s.

Flat owners can also look forward to better offers as more reverse mortgage plans could be offered by three local banks - DBS, OCBC Bank and United Overseas Bank.

A DBS spokesman said it is structuring such plans and ‘will share these soon’.

3 approved cases

INCOME has so far approved three reverse mortgages on HDB flats. They are all fully paid up. Income cannot provide the couples’ names because of customer confidentiality.

CASE ONE

Couple One have no dependants. Their three-room HDB flat in Marine Parade is currently valued at $240,000.

Income approved a monthly advance of $300 over 16 years.

CASE TWO

Couple Two also have no dependants. Their Jurong East three-room flat has a current

Source : Straits Times - 3 Apr 2006