[Retirement Decoded] Demystifying two of the “HKMC Retirement Trio”: the Reverse Mortgage Scheme and the Life Annuity Scheme

As the population ages, the Government’s burden of social security expenditure is becoming increasingly heavy. If fiscal pressure intensifies in future, whether welfare levels can be maintained at the current level remains uncertain. Retirement planning is therefore becoming increasingly important, and the Policy Reverse Mortgage Programme and Reverse Mortgage Programme have become options for many people when planning their retirement savings.

As two of the “HKMC Retirement 3 Treasures¹”, the Policy Reverse Mortgage Programme and Reverse Mortgage Programme are designed to allow people aged 55 or above to use a life insurance policy or a Hong Kong residential property as collateral (owners of subsidised sale flats without paying the land premium must be aged 60 or above) to obtain a policy reverse mortgage loan or reverse mortgage loan from a lending institution, so as to enjoy their later years with peace of mind. Borrowers may choose to receive an annuity on a monthly basis for a fixed term or for life², or apply for a lump-sum loan to meet their personal needs. In general, borrowers are not required to make repayments for life, unless the loan is terminated under specific circumstances³.

10Life previously published an article introducing the Policy Reverse Mortgage Programme and the Reverse Mortgage Programme. Our Customer Service Centre subsequently received many enquiries, and this article consolidates the common questions among them, in order to dispel misconceptions about the Policy Reverse Mortgage Programme and the Reverse Mortgage Programme, and help readers better understand these two schemes.

Myth 1: After applying for a policy reverse mortgage plan, can I take out a lump-sum loan if I have personal needs?

The borrower may apply for a lump-sum loan at any time during the selected annuity term to meet personal needs, with no restriction on how the funds may be used, such as paying for medical expenses after retirement or home improvements.

Myth 2: Can a policy reverse mortgage plan only be applied for using an eligible life insurance policy under the policy reverse mortgage plan?

No. Any life insurance policy that meets the eligibility criteria for a policy reverse mortgage loan may be used to apply for a policy reverse mortgage plan. The borrower may submit the relevant life insurance policy documents for preliminary assessment and approval.

Myth 3: Some life insurance policies require lifetime premium payments. Can such policies be used to apply for a policy reverse mortgage plan?

In general, the life insurance policy used to apply for a policy reverse mortgage plan must have been fully paid up. The borrower may check with the insurance company whether the policy can be arranged as fully paid up. 

Further reading: 【Self-made retirement income】Compare 3 policy cash-out methods Is policy reverse mortgage worthwhile?

Myth 1: If the mortgage on a property has not yet been fully repaid, can I apply for a reverse mortgage?

Yes, but before the reverse mortgage loan takes effect formally (i.e. before monthly annuity payments begin), the borrower must first fully repay the original mortgage loan on the property. When applying for a reverse mortgage loan, the borrower may also apply for a lump-sum loan to meet personal needs, with no restrictions on its use, including fully repaying the original mortgage on the property used as collateral.

Myth 2: After the borrower of a reverse mortgage loan passes away, what will happen to the property? Will any debt be left to the next generation?

When the borrower passes away, the reverse mortgage loan will end. The borrower’s estate administrator may have priority to fully repay the reverse mortgage loan to redeem the mortgaged property; otherwise, the lender will sell the mortgaged property to repay the reverse mortgage loan. If there is any shortfall, it will be covered by the Mortgage Insurance Programme Company Limited under the insurance arrangement with the lender. If there is any surplus, the lender will return it to the borrower’s estate administrator.

Myth 3: After applying for the reverse mortgage scheme, will my spouse have nowhere to live when I pass away?

All borrowers applying for the reverse mortgage scheme must be the property owners, and the scheme accepts joint applications from up to three borrowers. If a married couple applies jointly and one of them unfortunately passes away, the surviving borrower (i.e. the other property owner) may continue to receive monthly annuity payments and continue living in the original property until passing away, ensuring the partner’s living arrangements are not affected and allowing them to enjoy their later years in peace.  

Myth 4: For a property used as collateral for a reverse mortgage loan, are only properties with an age of 50 years or less accepted?  

No. If the property is more than 50 years old, it will be considered on a case-by-case basis, and an inspection report may be required if necessary. Data shows that the oldest property under the reverse mortgage scheme application was 71 years old (based on data from the HKMC website as of December 2024).

Further reading: Retirement income to ease children’s burden? A comprehensive look at the reverse mortgage scheme

The policy reverse mortgage scheme and the reverse mortgage scheme are designed to provide retirement or near-retirement individuals with another option when preparing for retirement income. When planning for retirement, one should better understand the features and advantages of different retirement products and make a choice that suits one’s own needs, so as to make retirement life more manageable.

If you have any questions about the above content or would like to know more, please feel free to call or WhatsApp 37051599 to enquire with our 10Life insurance consultants.

Notes:

1.    “HKMC Retirement 3 Gems” refers to the Reverse Mortgage Programme and the Reverse Annuity Programme operated by Hong Kong Mortgage Insurance Corporation Limited (HKMCI), as well as the Hong Kong Annuity Plan underwritten by Hong Kong Annuity Company Limited (HK Annuity Company). HKMCI and HK Annuity Company are wholly-owned subsidiaries of Hong Kong Mortgage Corporation Limited (HKMC). For details of the programmes, please refer to the HKMC website: www.hkmc.com.hk. The programmes are subject to the relevant terms and conditions.
2.    Borrowers under a reverse mortgage loan may choose to receive monthly annuity payments for life until the life insurance policy matures.
3.    Please refer to the Reverse Mortgage Programme Important Notice and the Reverse Annuity Programme Important Notice.
4.    The floating rate, fixed rate and Hong Kong Prime Rate are determined by HKMCI and HKMC from time to time respectively.
 

Last updated: 11 February 2025

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.