Korea expands eligibility for housing reverse mortgage program

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South Korea has eased the eligibility criteria for the housing reverse mortgage program that allows homeowners to provide their homes as collateral and receive a monthly pension by setting the upper limit of the housing price at under 1.2 billion won ($931,497).

According to financial industry sources on Wednesday, the Financial Services Commission (FSC) issued a legislative notice of partial amendments to the enforcement decree of the Korea Housing Finance Corporation Act, which stipulates that the standard price of houses eligible for reverse mortgage is under 1.2 billion won.

The amendment is expected to be implemented in September or October following a legislative notice and revisions to the internal regulations of the Korea Housing Finance Corp.

The reverse mortgage program allows homeowners aged 55 or older to provide their homes as collateral and receive monthly payments in the form of a lifetime annuity while continuing to live in their homes.

“We have added a provision that stipulates the upper price limit of eligible homes to expand the ceiling price from the current level so that more households can join the program for post-retirement housing and income stability,” the FSC said in a statement.

As a result, the upper price limit for homes eligible for housing annuities will be changed to under 1.2 billion won from under 900 million won.

The ease is expected to affect 140,000 households that were previously unable to join the program.

There have been calls for expanding the eligibility criteria as the reverse mortgage program has become more active and house prices surged in 2020 and 2021.

Last year, the number of new reverse mortgage applicants reached a record high of 14,580, up 34.9 percent from 10,805 a year ago, the highest since the introduction of the program in 2007.

The number of multi-unit houses with an official value exceeding 900 million won surged 247 percent to 757,000 units last year from 218,000 units in 2019.