Senior Citizen's Loan Info

Today, the key word among the older generation comprising pensioners and retirees is “independence”.

No longer do they want to rely on their offspring for day-to-day income during their golden years; instead, they prefer to source for instruments and assets that can give them recurring revenue they can manage on their own.

Traditionally, this has been derived through real estate rental and dividends from prudent equity investments. But another being enjoyed worldwide, and which could be well received if introduced to our shores, is a financial scheme known as reverse mortgages.

Proven popular in Australia and the United States and recently catching on in South Korea, this plan allows retired homeowners to extract the equity portion of their property for utilisation, without the need to make any monthly repayments until they sell their homes or pass away, unlike a typical mortgage.

In Australia, all that are required to obtain a reverse mortgage is that applicants be at least 62 years old and own property … and that’s it. They don’t have to show any proof of income or credit worthiness. Furthermore, they also don’t have to worry about their homes being repossessed or foreclosed, simply because they retain ownership and the amount owed cannot exceed 50 per cent of their property’s value.

Here’s how it works: Say an aged individual has a fully paidup RM200,000 home; he could receive up to half the amount for as long as he lives or occupies his property. The amount utilised, which can be released either in equal monthly payments for a fixed period, as a line of credit, or a combination of both, would be charged at the prevailing loan interest rate, while the portion yet to be utilised will earn savings interest.

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