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Mortgage for retirees planned

By on May 31, 2012 in Property News

SMC’s new loans for elderly will fill a gap

For retirees, a mortgage loan which normally requires at least 20 years of work to ensure debt payment ability is seemingly impossible, but the Secondary Mortgage Corporation (SMC) is planning to offer a new product focusing on serving the needs of the elderly.

With its new product, the SMC plans to be the country’s first to offer loans to clients aged over 60, with no need for monthly payments.

Deputy Finance Minister Wirun Techapaiboon revealed that the SMC is now conducting a feasibility study on the new financial instrument, called a reverse mortgage, focusing on retirees.

“We know that people are concerned that the country will become a greying society in the near future, but we can’t get away from it. The best we can do is to prepare ourselves to cope with the problems that will crop up with that change,” said Mr Wirun.

Since the number of elderly people is set to increase, it is essential for the state to prepare facilities and ensure proper welfare for them, especially those with no family to take care of them.

“The chief concern is if they have no income, no job, no savings and no family, how can they survive in those conditions? Even someone who owns a house, but is no longer earning, how they can live without money to put food on the table? This is where the idea came from, this new product has to answer these questions,” said Mr Wirun.

He said the product will allow retired people to obtain loans by using their houses as collateral, with no need to repay debts, but after the debtor passes away, the collateral will be sold on the market by the SMC to recoup the money.

In cases where assets have a value higher than the amount of debt, the excess amount will be returned to the family members of the debtors.

Debtors who wish to wipe out the debt can close the deal by just repaying as with a normal loan.

Pornipa Hachaiyaphum, president of the SMC, said that this kind of product is not new in other countries as South Korea and Hong Kong offer this financial product to ageing clients, but it is the first of its kind in Thailand.

She said the new product will be launched by the end of this year once the feasibility study ends.

The SMC, which is not a bank, will have to use banks to provide loans to targeted clients, with SMC making contracts with particular banks.

In some countries, the elderly can obtain a loan at 50% of the collateral value, but the details have yet to be finalised here. Ms Pornipa said there are details that need to be sorted, such as the possibility of the SMC allowing payment on a monthly basis to the elderly until one passes away, as well as the interest rate.

But the SMC has assured that its interest rates will be relatively low compared to the market as it considered its loans as welfare for the elderly.

The SMC is also conducting a study to set up a mortgage company to buy out loans from non-banks from the capital market.

It is also studying the mortgage insurance business as it might play the role of mortgage loan guarantor to help people buy their own home. Normally banks allow home buyers to obtain a mortgage at not more than 70% of the property’s value, but the SMC guarantees they may be able to get 90% of the house’s value, which means that they need less money to buy a house.

Source : Bangkok Post 31 May 2012

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