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Reverse Mortgage Programme

Reverse Mortgage Programme

 

The Mortgage You Paid Supports Your Retirement

Rent Out Your Property For Better Quality of Life

 

Introduction

The Reverse Mortgage Programme is operated by HKMC Insurance Limited (HKMCI), a wholly-owned subsidiary of The Hong Kong Mortgage Corporation Limited, which enables people aged 55 or above to use their residential properties in Hong Kong as security to obtain reverse mortgage loans.

 

Under a reverse mortgage loan, the borrower will receive monthly payouts over a fixed payment term or throughout his entire life. The borrower may also borrow lump-sum payouts for specific purposes. In general, the borrower does not need to repay the reverse mortgage loan during his lifetime, unless it is terminated under specific circumstances.

 

When a reverse mortgage loan is terminated, the property owner (or his personal representative) will have the preferential right to redeem the mortgaged property by repaying in full the outstanding loan amount, otherwise the lender will dispose of the mortgaged property to repay the outstanding loan amount. If there is any shortfall, it will be borne by the HKMCI under an insurance arrangement between the lender and the HKMCI. Any surplus will be passed to the property owner.

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Eligibility Criteria

Joint application for a reverse mortgage loan by up to three borrowers is allowed.

In general, the borrower and the property used as security must:

 

Eligibility Criteria
Borrower
  • be aged 55 or above (or aged 60 or above for owners of subsidised sale flats with unpaid land premium) and a holder of a valid Hong Kong identity card; and
  • not be an undischarged bankrupt or otherwise subject to bankruptcy petition or individual voluntary arrangement.
Property offered as security
  • be a residential property in Hong Kong (property acquired by deed of gift may be considered);
  • be owned by:

(i) the borrower as sole and beneficial owner or as joint tenants (if there is more than one borrower); or

(ii) a limited company, incorporated in Hong Kong, wholly and directly held by the borrower (or if there is more than one borrower, all borrowers);

 

  • not exceed 50 years of age (otherwise  it  will be considered on a case-by-case basis);
  • not be subject to any resale restrictions (except for the alienation restriction of subsidised sale flats imposed by the relevant authority); and
  • not be rented out 

(The borrower may apply to rent out the mortgaged property if it has been owned for at least one year and all the borrowers have:

(i) declared that they have retired; or

(ii) moved out to obtain elderly or medical care.

If the property is a subsidised sale flat with unpaid land premium, the borrower must obtain consent form the relvant authority, in addition to the above requirement of property ownership.)

Please refer to the Information Pack for more details.

 

To avoid any unnecessary costs and expenditures, individuals who are interested in applying for a reverse mortgage loan should first conduct a preliminary eligibility assessment with a bank before taking actions such as changing property ownership or conducting property inspection. 
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Key Product Features and Benefits

Key Product Features and Benefits
Flexible payment termMonthly payouts over a fixed period of 10, 15 or 20 years or throughout the borrower’s entire life.
Lump-sum payout

Lump-sum payouts for specific purposes such as

 

  • refinancing of an existing reverse mortgage or full repayment of other existing mortgage of the borrower’s property which is used as security for the relevant reverse mortgage loan (not applicable to the property owned by a limited company)
  • settlement of land premium for subsidised housing property
  • payment for home improvement, repairs and maintenance
  • medical expenses (treatment outside Hong Kong is acceptable)
  • fees for setting up an enduring power of attorney
  • purchase of interment right in columbarium and cemetery, as well as expenses for funeral services.
Flexible arrangement to rent out property

Mortgaged property can be rented out under specific circumstance for a higher income.

Lifetime home residenceProperty owner is entitled to stay in the property for the rest of his life, even after the payment term is due (10, 15 or 20 years). However, interest and mortgage insurance premium will be debited to the outstanding loan amount.
No repayment during lifetimeNo repayment of outstanding loan amount is required during the borrower’s lifetime, unless the reverse mortgage loan is terminated under specific circumstances.
No penalty for early repayment of loanFull repayment of reverse mortgage loan and redemption of mortgaged property may be made at any time without penalty.
Six-month cooling-off periodIf a reverse mortgage loan is terminated for whatever reason within the first 6 months, a refund or waiver of mortgage insurance premiums will be given. However, the borrower is still required to bear the accrued interest, financed fees (if any) and the relevant fees in relation to the termination of the reverse mortgage loan.
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Monthly Payout Amount

In general, the higher the property value, the higher the monthly payout amount will be. The older the borrower and the shorter the payment term, the higher the monthly payout amount will be. If there is more than one borrower, the entry age of the youngest borrower will be used for calculation of the monthly payout amount.

 

1. Specified Property Value

 

Table 1: Maximum amount of specified property value for payout calculation
Appraised property value @Maximum amount of specified property value for payout calculation #
HK$8 million or less100% of appraised property value ^
Over HK$8 million to HK$12 millionHigher of 80% of appraised property value and HK$8 million ^
Over HK$12 million to HK$16 millionHigher of 70% of appraised property value and HK$9.6 million
Over HK$16 millionHigher of 60% of appraised property value and HK$11.2 million (capped at HK$15 million)

@ For subsidised sale flats with unpaid land premium, the appraised property value is determined by the open market value minus the land premium amount.

 

^ For any refinancing property with appraised property value at HK$12 million or below, the maximum amount of the specified property value for payout calculation will be 80% of the appraised property value.

 

# Determination of maximum amount of specified property value is subject to the aggregate amount of appraised property value in case of more than one property as security under a reverse mortgage loan.

 

 

 

2. Two Options of Mortgage Plans for Selection

 

(a) Floating rate mortgage plan

 

Entry age60 years old70 years old
Table 2: Monthly payout amount (per HK$1 million of specified property value)
Payment termOne borrowerTwo borrowersThree borrowersOne borrowerTwo borrowersThree borrowers
10-year

$3,700

$3,300

$3,000

$5,100

$4,600

$4,200

15-year

$2,800

$2,500

$2,250

$3,800

$3,500

$3,200

20-year

$2,400

$2,100

$1,900

$3,300

$3,000

$2,700

Life

$2,000

$1,800

$1,550

$3,100

$2,800

$2,400 

 

For refinancing of any reverse mortgage loan subsisting as at 30 April 2014 or with counselling certificate issued on or before 30 April 2014, details of (i) the maximum amount of the specified property value for payout calculation and (ii) preferential insurance premium credit are set out here.

 

 

Table 3: Examples of calculation of monthly payout amount (HK$)
 Example 1Example 2Example 3
Borrower(s) and Entry AgePerson aged 70Husband aged 70 and wife aged 60Husband and wife both aged 70
Payment TermLife10-year20-year
Property Value$2,500,000$6,000,000$28,000,000*
Monthly Payout Amount$3,100 x 2.5 = $7,750$3,300 x 6 = $19,800$3,000 x 15 = $45,000

* Maximum amount of the specified property value for payout calculation is capped at HK$15 million.

 

 

(b) Fixed rate mortgage plan 1

 

Please enquire with the lender for the monthly and maximum lump-sum payout amounts under a fixed-rate mortgage plan. In general, a fixed-rate mortgage plan offers a higher amount in monthly payout and maximum lump-sum payout.

 

1 HKMCI reserves the right to amend and/or withhold the fixed-rate mortgage plan, and the relevant terms and conditions at its discretion without prior notice.

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Costs

 

Costs

Interest Expense

To be charged on the outstanding loan amount on a compound basis.

Mortgage Insurance Premium

To be debited to the outstanding loan amount:

 

  1. Upfront Mortgage Insurance Premium is 1.96% of the specified property value, payable by 7 annual instalments starting from the 4th until the 10th anniversary.  Each annual instalment is calculated at 0.28% of the specified property value under the reverse mortgage loan.
  2. Monthly Mortgage Insurance Premium is payable on a monthly basis at the annual rate of 1.25% of the outstanding loan amount.

Counselling Fee +

To be paid to the counsellor for the counselling service.

Legal Fees +

To be paid to the solicitors for execution of mortgage documents and other relevant legal documents.

+ Borrowers may choose to finance the fees in their reverse mortgage loans.
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General Application Flow

Please read the Important Notice carefully before proceeding further with application for a reverse mortgage loan. The notice provides additional information about reverse mortgage, and should always be read together with the Information Pack and the other materials relating to the Reverse Mortgage Programme.

 

General Application Flow

Step 1:

Pre-application

Enquire with a bank which will explain details of the Reverse Mortgage Programme and conduct a preliminary eligibility assessment. Under any circumstance, there is no need to apply for a reverse mortgage loan through other intermediaries (except banks).

Step 2:

Counselling

Make an appointment and meet with an eligible counsellor before making a formal application for a reverse mortgage loan. During the counselling session, the counsellor will explain the general features of a reverse mortgage loan, the major rights and obligations as well as legal consequences of taking out a reverse mortgage loan. The counsellor will issue a Counselling Certificate upon successful completion of counselling.

Step 3:

Formal Application

After obtaining the Counselling Certificate, a formal application can be submitted. 

Step 4:

Execution of
Legal Documents

Once a formal application is approved, mortgage documents and other related legal documents can be executed.

Enquiry

For details, please refer to the Reverse Mortgage Programme’s Information Pack.

Should there be any enquiries, please contact a bank, your counsellor or call the Reverse Mortgage Programme Hotline.

 

Reverse Mortgage Programme Hotline: 2536 0136

 

Enquiry E-mail: rm_enquiry@hkmci.hk

General Information

1) List of Banks
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2) List of Reverse Mortgage Counsellors (provided by The Law Society of Hong Kong)
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3) Information Pack
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4) Leaflet
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5) Level of Monthly Payout and Maximum Lump-Sum Payout Amount at Closing
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6) Important Notice
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7) Reverse Mortgage Programme Statistics
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8) Enduring Power of Attorney Leaflet
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9) List of Solicitors and Doctors for Preparation of Enduring Power of Attorney
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10) Special Announcement for Refinancing Arrangement (7 April 2014)
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11) Seminar on “Reverse Mortgage- Enduring Power of Attorney and Part II Order for Mentally Incapacitated Persons, Role of Legal and Medical Practitioners"
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12) Survey Report on Reverse Mortgage (December 2010)
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