Reverse mortgage to address insufficient retirement fund

KUALA LUMPUR, Oct 18 (Sin Chew Daily) — Mortgage Corporation of Malaysia Cagamas Bhd is planning to launch a reverse mortgage scheme for seniors with insufficient retirement funds using their homes as collateral for a loan.

Collaborating with Employees’ Provident Fund (EPF) and Credit Counseling and Debt Management Agency (AKPK), the scheme, scheduled to be launched at the end of the year, will address income security for seniors.

According to polls, 85% of Malaysians have admitted that their EPF savings are insufficient to meet their daily expenses when they retire.

The COVID-19 pandemic sees many withdrawing their retirement savings to pay for daily expenses.

Cagamas Bhd president and chief executive officer Datuk Chung Chee Leong said the company is offering the loan scheme to seniors who are EPF contributors with insufficient retirement fund as one of the proposals for them to increase their income after retirement while AKPK will provide consultation services.

In an interview with Sin Chew Daily, Chung said the applicant must own a home, a retiree aged 55 years and above and does not have sufficient retirement funds.

“Cagamas collaborates with AKPK to ensure the applicants need cash. They are not encouraged to apply for the loan if they have sufficient cash,” he said.

The reverse mortgage scheme is targeted at seniors with insufficient retirement funds to maintain their daily lives.

The advantage of this scheme is that a disbursement on a monthly basis would be paid to the applicant based on the value of his home and age. The applicant continues to stay in the home until they pass away.

“Technically, the applicant does not need to pay back Cagamas,” he said.

Cagamas Bhd president and CEO Datuk Chung Chee Leong: The reverse mortgage scheme is designed to help retirees secure loans using their homes as collateral.

After the death of the homeowner, the next of kin may opt to repay the loan and take back the property or sell the property for recovery purposes.

If the house sells for more than the amount owed, the heirs of the home will receive the balance sum. If the house sells for less than the amount owed, the heirs of the house will not need to top up the shortfall.

“For example, a 60-year-old applicant owns a home valued at RM1 million. Based on the value of the home, he is entitled to a monthly distribution of RM2,500 to RM3,000 until he passes on.

“If the house is under joint name, it continues to release the monthly payment until both have passed on.

“If the husband has died, Cagamas will continue to pay the wife until her death,” he said.

If a retiree were to sell his house, he would still own a large sum of cash but to rent a house where he would be using the cash to pay rent for the rest of his life, he said.

“Some will deposit the cash in a bank while others opt to invest in the stock market but this is risky as it may incur losses,” he said.

The COVID-19 outbreak sees many people sandwiched between aging parents and young children with tremendous financial burdens.

The reverse mortgage, modeled after similar schemes in Hong Kong and South Korea, is an option for retirees to reduce their children’s financial stress, he said.



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