Create your own retirement income and ease your children’s burden? A full guide to the Reverse Mortgage Programme

Whatever stage children are at in their growth, parents are always their greatest support. In recent years, many Hong Kong people have considered living abroad. According to figures from the Census and Statistics Department, there were a net outflow of 60,000¹ Hong Kong residents last year, about twice that of the previous year. Faced with the younger generation moving overseas, the older generation naturally does not want to become a burden on their children, and may even hope to ease their financial and psychological pressure, allowing them to start a new life abroad with peace of mind. How should older parents manage their finances, and can they create a steady retirement income stream and achieve a self-sufficient retirement through passive income?

There are many retirement protection products on the market that require policyholders to plan early or make a one-off capital injection, such as annuity plans. In addition to the Hong Kong Annuity Plan and Policy Reverse Mortgage Plan, the “HKMC Retirement 3 Treasure”² launched by the Hong Kong Mortgage Corporation Limited (Mortgage Corporation) allows eligible applicants to use their residential property in Hong Kong as collateral to obtain a reverse mortgage loan from a lending institution. This turns the value of their self-occupied property into cash flow, while also enabling them to lock in property values early. Even if the market falls later, they will not be affected, and they need not worry about a volatile economic environment, allowing them to enjoy a stable retirement life.

The reverse mortgage scheme allows retirees to choose to receive monthly annuity payments over a fixed annuity period (10, 15 or 20 years) or for life, thereby creating a self-made retirement income. At the same time, they can continue to live in their existing property until the end of their lives. Even if their children are not currently around to care for them, it can still ease the burden on both sides, allowing both parties to live more comfortably and freely.

If children plan to emigrate overseas, while parents who have reached retirement age intend to remain in Hong Kong and enjoy their later years, the older generation may consider receiving a fixed monthly cash flow through a reverse mortgage, while continuing to live in their existing property until the end of life. Taking a 65-year-old man who owns a residential unit worth HK$8 million as an example, under the fixed-rate mortgage plan³, he can receive a fixed monthly annuity of HK$22,000 for life.

By obtaining a stable income each month through a reverse mortgage, he can easily plan his retirement life for himself, while his children can also feel reassured as they start a new life overseas. With a fixed monthly income, he may also be able to travel regularly to visit his children and enjoy life abroad together.

Eligible persons who apply this month may start receiving an annuity as early as next month, enabling a self-sufficient retirement life and reducing the financial burden on their children. If one day the borrower passes away, or chooses to terminate the Reverse Mortgage Programme loan, their children will also not need to worry about any debt liability.

1. When the Reverse Mortgage Programme loan is terminated, the property owner (or their estate representative) may prioritise full repayment of the Reverse Mortgage Programme loan to redeem the mortgaged property.

2. If the property owner (or their estate representative) chooses not to redeem the property, the lender will sell the mortgaged property to repay the Reverse Mortgage Programme loan. If there is any surplus, it will be returned to the property owner (or their estate representative). If there is any shortfall, it will be borne by HKMC Insurance Limited (HKMC Insurance Company) under the insurance arrangement with the lender, so that the borrower's descendants will not have any debt liability arising from a family member's application for the Reverse Mortgage Programme loan.

Many couples hold property jointly, and the reverse mortgage scheme also accepts joint applications. If one party unfortunately passes away, the remaining borrower (i.e. the other property owner) may continue to receive the monthly annuity and remain in the original property until the end of their life, ensuring that the partner’s standard of living will not be affected.

The reverse mortgage scheme accepts joint applications from up to three borrowers⁴. Borrowers must be Hong Kong identity card holders aged 55 or above (owners of subsidised sale flats without premium payment must be aged 60 or above). Under a joint application, the monthly annuity amount will be calculated based on the age of the youngest borrower. The monthly annuity amount payable to joint borrowers will be lower than that under a single application.

As people grow older, living arrangements may change, for example by moving abroad to live with their children, relocating to the Greater Bay Area for retirement, or moving out of the property to receive elderly care or medical care services. In such cases, how should the property be handled? Can it be rented out? Can the borrower still receive the monthly annuity?

Once the reverse mortgage takes effect, if the borrower declares that they have already retired, or moves out of the property to receive elderly care or medical care services, the borrower may flexibly arrange to rent out the property, allowing them to receive both the monthly annuity and rental income, creating dual income streams. This gives the borrower greater financial protection when planning for retirement, especially when there is a need to pay for elderly care or medical care services, helping to reduce monthly healthcare expenses and enabling them to rest and recover with peace of mind.

Even if retirement life brings unexpected expenses, such as home improvement, repair and maintenance works, or estate planning costs, the borrower may also apply for a lump-sum loan to meet personal needs. However, please note that the higher the amount of the lump-sum loan withdrawn by the borrower, the lower the subsequent monthly annuity will be correspondingly; if the lump-sum loan withdrawn has reached the maximum amount, the borrower will no longer receive any monthly annuity.

When property prices rise, the borrower may also choose to refinance by taking out a new mortgage to repay the existing reverse mortgage loan in full, and then reapply to obtain a higher monthly annuity.

By taking out an annuity mortgage, you can create your own retirement income, enjoy a stable home life and receive a fixed monthly cash flow at the same time, achieving two goals at once. Interested applicants may refer to the table below for the eligibility criteria.

In addition to the above eligibility criteria, factors such as the value of the property and the age at enrolment will also affect the monthly annuity amount. Want to know how much monthly annuity your property may be able to obtain? Readers can use the Reverse Mortgage Calculator provided by the Mortgage Corporation to find out.

Notes: 
1. Population figures as at end-2022, Census and Statistics Department, 16.2.2023 
2. “HKMC Retire3” refers to the Reverse Mortgage Programme and the Policy Reverse Mortgage Programme operated by HKMC Insurance Limited, as well as the Hong Kong Annuity Plan underwritten by Hong Kong Annuity Limited (HKMC Annuity). HKMC Insurance Limited and Hong Kong Annuity Limited are wholly owned subsidiaries of the Hong Kong Mortgage Corporation Limited. For details of the schemes, please refer to the Hong Kong Mortgage Corporation Limited website: www.hkmc.com.hk. 
3. Under the Fixed-Rate Mortgage Plan, the interest rate is 4.5% per annum for the first 30 years, and thereafter Hong Kong Prime Rate minus 2%; Hong Kong Prime Rate is determined by the Hong Kong Mortgage Corporation Limited from time to time.
4. All borrowers must meet the relevant eligibility criteria.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.