Korea expands eligibility for reverse mortgage loans to homeowners

[Image source: Gettyimagesbank]

One of the safety nets for retirement, reverse mortgages will have expanded eligibility criteria as the National Assembly passed an amendment to the Korea Housing Finance Corporation Act, which changes the maximum housing price for eligibility to an amount delegated to a presidential decree from the current public disclosure price of 900 million won ($698,992).

The government has been deliberating on the upper limit of the housing price for reverse mortgage and it is reported that 1.2 billion won is a likely figure. Since its introduction in 2007, while real estate prices have skyrocketed, the eligibility for reverse mortgage has been limited to homeowners with properties valued at 900 million won or less.

According to the Korea Housing Finance Corp., the number of new reverse mortgage applicants in the first quarter of this year was 5,057, an increase of 56.4 percent compared with 3,233 in the first quarter of last year. To be eligible for a reverse mortgage, at least one spouse must be over 55 years old.

Despite its popularity, the limited eligibility criteria have caused dissatisfaction among those who want to receive reverse mortgage payments. Many have pointed out that the previous maximum public disclosure price of 900 million won falls short even of the median transaction price for apartments in the metropolitan area.

The number of shared housing units exceeding the public disclosure price of 900 million won increased by 247 percent to 757,000 households last year from about 218,000 households in 2019. Among them, it was estimated by the Ministry of Land, Infrastructure and Transport that there are approximately 193,700 shared housing units in the price range of 900 million to 1.2 billion won this year.