Uniquely Singapore, F1 or F9: HDB Lease
Buy-back?
By Leong Sze Hian
I
refer to the article “HDB unveils ‘income for
life’ scheme for the elderly” (ST, Feb
29).
The HDB will pay $87,000
plus a $10,000 government subsidy ($5,000 cash + $92,000 to CPF
Life), for the balance 40 years of the lease, on a flat with a
70-year lease.
In
a normal reverse mortgage, the cash withdrawals are charged
interest like a loan, which is offset against the market value of
the home at death.
Using a loan rate of 5 per
cent, and a price appreciation of 5 per cent for the HDB flat, the
$5,000 initial lump sum, and $500 monthly from age 65 (CPF Life
start age) to 92 (end of 30-year lease), will incur a liability of
$365,357, and the flat’s $200,000 value would have appreciated to
$864,388.
Does this mean that the
HDB, in a sense, may stand to gain about $498,731 ($864,388 –
$365,357)?
In
other countries, a reverse mortgage also typically allows one to
stay for as long as one lives, instead of for 30 years.
Why would somone need to
pay HDB to extend the lease if he or she is still alive, after 30
years, when the net balance value of the flat is
$498,731?
How likely is it for a
lower-income Singaporean staying in a 2 or 3-room flat, to be able
to afford to pay for the lease extension?
Thus, many may end up
losing their homes, and moving to a HDB rental flat and pay rent,
which may go against the very reason why they chose the reverse
mortgage in the first place – to be able to stay in their own
home.
