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Reverse mortgage programme - examples

28-Oct-2013

   Since the launch of the reverse mortgage programme, the number of participating banks has been increasing, so as the cumulative number of applications. Most applications are single applications, annuity period of 10 years and lifetime annuity are most popular. The following example provides a reference for the calculation of annuity:


Example One

 Mr. Chow, 70-year-old, owning and living alone in a property valued at HK $ 4 million, is conscious about the decrease of his liquidity and hopes to continue to live a worry-free retirement life by obtaining annuity at the current property prices, as he sees as at an appropriate level.

Chow has no children. In order to ensure a stable annuity as the cost of living, Chow applies for a lifetime monthly charge annuity for his reverse mortgage programme. According to Mr. Chow's application requirements, the monthly annuity he receives is as follows:


 

 

Age of applicant: 70 years old
Age of property: 40 years
Use of property: owner occupation
Property valuation: HK $ 4,000,000
Annuity period: lifetime
Monthly annuity to receive: HK $ 12,400
According to information provided by the Hong Kong Mortgage Corporation Limited, based on the age of applicant and the lifetime period chosen, HK $ 3,100 of annuity is to be received for every million in property valuation per month (for detailed annuity table, please refer to the previous article), multiplied by four times (property valued at HK $ 4 million).

 

 



Example Two

 70-year-old Mr. Cheung and 60-year-old Mrs. Cheung are currently living in property valued at HK $ 6 million. They have a son and a daughter. They had moved out and started their own families. As a retiring civil servant, Mr. Cheung receives a monthly pension as a steady income. But, he still deeply finds that the current inflation is intensified and the prices soar. He hopes to increase the monthly income to meet the daily expenses without adding their children’s burden by asking for more monthly contributions. So the couple has decided to apply for the reverse mortgage programme, and select the 10-year period to receive annuity in the future. They think that even if they pass away, their children can still choose whether to redeem the property or not and this also eliminates the need to worry about place of living for their rest of time. The calculation of the Cheung couple’s annuity is as follows:

 

 

Age of applicant: 70-year-old and 60-year-old 
                               (Taking the lower age for calculation, 
                               in this case, it is 60-year-old)
Age of property: 30 years
Use of property: owner occupation
Ownership: joint ownership, the Cheung couple is required be co-borrowers
Property valuation: HK $ 6,000,000
Annuity period: 10 years
Monthly annuity to receive: HK $19,800
According to the information provided by the Hong Kong Mortgage Corporation Limited, based on the age of applicant and the 10-year period chosen, HK $ 3,300 of annuity is to be received for every million in property valuation per month (for detailed annuity table, please refer to the previous article), multiplied by 6 times (property valued at HK $ 6 million).

 



 The Reverse Mortgage Programme is provided by the Hong Kong Mortgage Corporation Limited. For inquiries, please call the Programme Hotline: 2536 0136, or visit their website at  http://www.hkmc.com.hk/chi/pcrm/ourbusiness/rm.html for reference.

 (The above is only a brief introduction to the Reverse Mortgage Programme. The Hong Kong Housing Society is not the service provider. For the most accurate and updated information, please refer to the news release from the Hong Kong Mortgage Corporation Limited. Thank you for your attention.)

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