Hong Kong Changes Reverse Mortgage Rules Allowing Seniors to Lease and Relocate

The government-owned Hong Kong Mortgage Corporation (HKMC) has introduced a rule which will allow reverse mortgage borrowers to lease the properties they’ve taken out a loan against, which could potentially make it easier for them to relocate to a less expensive area of the Chinese territory. This is according to a story in the South China Morning Post.

The rule, first introduced in February 2018, allows as many as 3,200 pensioners with a reverse mortgage to lease out their homes as long as they have officially declared that they have retired, according to comments made by HKMC chief executive Raymond Li Ling-cheung to the Post.

“Pensioners can opt to live with their children, in nursing homes, or move to the Greater Bay Area, which has a nice retirement environment, and where the cost of living is cheaper,” he said to the Post.

Other added benefits from these rule changes include providing pensioners with additional income, while also having the potential to reduce the strain on Hong Kong’s housing inventory, Li added.

While HKMC was originally established to buy mortgage loans from banks in order to repackage them as securities products to sell on the market, its role has evolved and expanded to operate more similarly to an insurance company. This is because it expanded its offerings to include mortgage insurance programs, while also launching a public annuity program in mid-2018.

The reverse mortgage program managed by HKMC is open to territory pensioners aged 55 and above, according to the mortgage company’s website.

Similarly to the American product, the HKMC reverse mortgage is a non-recourse loan, with any shortfall at the time the loan comes due being borne by HKMC under an insurance arrangement between the lender and the mortgage company. This version of the product also requires mandatory counseling with an eligible party before proceeding to a formal application.

Read the full article on the lease provision at the South China Morning Post.

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