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Reverse Mortgage Programme

The Hong Kong Mortgage Corporation Limited

Reverse Mortgage Programme

 

The Mortgage You Paid Supports Your Retirement

Rent Out Your Property For Better Quality of Life

HKMC High Income Challenge (Full Version)

Introduction

The Reverse Mortgage Programme is operated by HKMC Insurance Limited (HKMCI), a wholly-owned subsidiary of The Hong Kong Mortgage Corporation Limited (HKMC), 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 (or his personal representative).

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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 offered 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 (except if the indebtedness under the relevant individual voluntary arrangement is to be repaid in full at closing by way of lump-sum payout).
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 owned 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 provided written consent from the relevant authority is obtained); 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 from the relevant authority, in addition to the above requirement of property ownership.)

Please refer to the Information Pack for more details.

 

To avoid any unnecessary costs or expenditures, individuals who are interested in applying for a reverse mortgage loan should enquire with an institution which is participating in the Reverse Mortgage Programme as a lender or referrer (participating insitiution) before taking actions such as changing property ownership. 
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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 the following purposes:

 

  • refinancing of an existing reverse mortgage or full repayment of the existing mortgage of the borrower’s property to be offered as security (not applicable to the property owned by a limited company) at the time of reverse mortgage loan application
  • repayment of the borrower's other mortgage loans or personal loans (including revolving credit facilities or credit card balances), which are originated by an authorized institution carrying on banking business under the Banking Ordinance, an authorized insurer carrying on insurance business under the Insurance Ordinance or a licensed money lender under the Money Lenders Ordinance*
  • settlement of land premium payment for subsidised housing property
  • payment for home improvement, repairs and maintenance of the property
  • payment for medical expenses (treatment outside Hong Kong is acceptable)
  • payment for 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 circumstances 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 (10, 15 or 20 years) is due. However, interest and mortgage insurance premium will be posted 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 can 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 and 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.

 *Relevant loans must be made at least 12 months before the application date of lump-sum payout.  However,  

this requirement is not applicable to revolving credit facilities or credit card balances.

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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.

 

Specified Property Value

 

Table 1: Maximum amount of specified property value for payout calculation (HK$)
Appraised property value @Maximum amount of specified property value for payout calculation #
$8 million or less100% of appraised property value ^
Over $8 millionSum of $8 million and 50% of portion exceeding $8 million (capped at $25 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.

 

# Determination of the 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.

 

^ For refinancing property, the maximum amount of the specified property value for payout calculation will be 80% of the appraised property value.  (Note: This is not applicable to a borrower who is holding a  counselling certificate issued before 1 May 2014.)

 

&For refinancing property, the maximum amount of the specified property value for payout calculation will be determined on the basis set out above or 80% of the appraised property value, whichever is lower. (Note: This is not applicable to a borrower who is holding a counselling certificate issued before 1 May 2014.)

 

 

 

Two Options of Mortgage Plans

The borrower can choose either a floating-rate or a fixed-rate mortgage plan according to his financial need.  In general, a fixed-rate mortgage plan offers a higher amount of monthly payout and maximum lump-sum payout than a floating-rate mortgage plan. 

 

 

Entry age60 years old70 years old
Table 2: Monthly payout amount under floating-rate mortgage planα (HK$) (per $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 

 

αThe above monthly payout under the floating-rate mortgage plan is calculated at the interest rate as at 30 June 2021 (i.e., the Hong Kong Prime Rate minus 2.5% p.a.), and is for reference only. The floating interest rate and the Hong Kong Prime Rate will be determined by the HKMCI and the HKMC from time to time respectively.

 

 

Entry age60 years old70 years old
Table 3: Monthly payout amount under fixed-rate mortgage planβ (HK$) (per $1 million of specified property value)
Payment termOne borrowerTwo borrowersThree borrowersOne borrowerTwo borrowersThree borrowers
10-year

$4,360

$3,890

$3,540

$6,010

$5,420

$4,950

15-year

$3,300

$2,950

$2,650

$4,480

$4,130

$3,770

20-year

$2,830

$2,470

$2,240

$3,890

$3,540

$3,180

Life

$2,360

$2,120

$1,820

$3,650

$3,300

$2,830

 

βThe above monthly payout under the fixed-rate mortgage plan is calculated at the interest rate of 3% p.a. for the first 25 years and the Hong Kong Prime Rate minus 2.5% p.a. thereafter, and is for reference only.  The fixed interest rate and the Hong Kong Prime Rate will be determined by the HKMCI and the HKMC from time to time respectively.

 

 

Table 4: Examples of calculation of monthly payout amount (HK$)
 

Example 1

Example 2

Example 3

Borrower (s) and entry age

Person aged 70

Husband  aged 70 and wife aged 60

Husband and wife both aged 70

Payment term

Life

10-year

20-year

Property value

$2,500,000

$6,000,000

$45,000,000Ω

Monthly payout amount

(Floating-rate mortgage plan)

$3,100 x 2.5 = $7,750

$3,300 x 6 = $19,800

$3,000 x 25 = $75,000

Monthly payout amount

(Fixed-rate mortgage plan)

$3,650 x 2.5 = $9,125

$3,890 x 6 = $23,340

$3,540 x 25 = $88,500

 

ΩMaximum amount of the specified property value for payout calculation is capped at $25 million.

 

 

 

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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 posted to the outstanding loan amount:

 

(i) Upfront Mortgage Insurance Premium is 1.96% of the specified property value, payable by 7 annual instalments on the 37th, 49th, 61st, 73rd, 85th, 97th and 109th monthly payout dates respectively. Each annual instalment is calculated at 0.28% of the specified property value under the reverse mortgage loan.

 

(ii) 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 counselling service.

Legal fees +

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

+ The borrower may choose to finance the fees in his reverse mortgage loans.
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Application Flow

 

 

 

 

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

 

General Application Flow

Step 1:

Pre-application

Enquire with a participating institution which will explain details of the programme and conduct a preliminary eligibility assessment. Under any circumstances, there is no need to apply for a reverse mortgage loan through other intermediaries. For the list of participating institutions of the RMP, please click here.

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. Meanwhile, the borrower is required to complete a health questionnaire conducted by the HKMCI before closing. After the application is approved, mortgage documents and other related legal documents will be executed.

Enquiry

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

Should there be any enquiries, please call the HKMC Retire 3 Hotline at 2536 0833 or email us at hkmcretire3@hkmc.com.hk. You may also contact a participating institution or an eligible counsellor. 

 

The programme is subject to relevant terms and conditions.

General Information

1) List of Participating Institutions
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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) Sample of Health Questionnaire
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8) Reverse Mortgage Programme Statistics
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9) Enduring Power of Attorney Leaflet
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10) List of Solicitors and Doctors for Preparation of Enduring Power of Attorney
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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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