Senior Citizen Mortgage Plan Announced

Starting next year, those aged 65 and older with one residence will be entitled to money for living expenses if they provide their houses as security to banks or insurance companies.

Once payments exceed the value of the house put up for collateral, the government will fill the gap as guarantor.

The government and Uri Party held a government-party consultative conference on February 16 to support elderly income measures, and decided to introduce the above-mentioned reverse-mortgage scheme starting next year.

The plan will be available to couples with both spouses over age 65 who have a house officially valued at 600 million won or less (around 750 million won in market price terms).

At present, the government estimates the number of eligible households to be about 770,000.

According to the plan, if a 65 year old takes out a reverse-mortgage plan, he or she will receive 930,000 won every month from a 300 million won home, or 1.86 million won every month from a 600 million won home. The payment is adjusted periodically against the housing price growth rate.

In addition, if an elderly couple with an annual income of 12 million won or less collateralizes a 25.7-pyeong house worth less than 300 million won, they will benefit from deductions and exemptions from income for loan interest rates with an annual two million won (pension income) deduction, a 25 percent property tax reduction, and an exemption from housing bond purchases (one percent of the established value) if they establish maximum-sum mortgages.

When subscribers need a large sum of money to pay medical fees or for their children’s marriages, they may receive up to 30 percent of their entire loan in a lump sum.

Sun-Woo Kim sublime@donga.com