In the future, individuals will be able to use their dwellings reverse mortgages to repay business loans or pay for redevelopment contribution fees.
According to the Financial Services Commission on the 27th, a revised proposal for the "Enforcement Decree of the Korea Housing Finance Corporation Act" will soon be presented to the Cabinet Council.
A reverse mortgage allows homeowners to offer their dwellings as collateral and receive monthly payments for life while continuing to live in their homes. One spouse must be at least 55 years old, and the assessed value of the dwelling provided as collateral must be 1.2 billion won or less to be eligible.
Subscribers can temporarily withdraw up to 50% of the limit of the "Housing Collateral Pension Loan" (the present value of total reverse mortgage payments to be received until the age of 100) for reasons including medical, education, and wedding expenses; this is referred to as individual withdrawal.
The Financial Services Commission has decided to include the repayment of individual business loans for small business owners and self-employed individuals among the allowable reasons for individual withdrawals under the revised enforcement decree. Up to 90% of the withdrawal limit can be accessed, but this applies only to self-employed individuals who meet the criteria for small business owners under the "small business basic law" during their shutdown process. This aims to assist small business owners in smooth closures and rapid recoveries. If a closure is not reported within six months, the withdrawal amounts must be repaid.
Individual withdrawals from the dwellings reverse mortgage can also be used to pay for redevelopment contribution fees. If the purpose is to pay for maintenance project contribution fees for redevelopment, remodeling, or small housing maintenance projects, up to 70% of the reverse mortgage can be withdrawn.
The elderly have difficulty obtaining funds for contribution fees, which results in relatively low approval rates for redevelopment and maintenance projects. The Financial Services Commission noted that in first-generation new towns, where the aging rate is high, contribution fees have hindered the promotion of maintenance projects. Allowing payment of contribution fees for redevelopment and reconstruction with dwellings reverse mortgages aims to accelerate the pace of maintenance projects.
Financial authorities and the Housing Finance Corporation expect that the number of reverse mortgage subscribers will increase once this revised proposal is implemented.