The Government Savings Bank (GSB) is set to offer its first batch of reverse mortgages -- home equity conversion housing loans for the elderly -- worth up to 5 billion baht early next year, says its head.
Homeowners who qualify for the bank's reverse mortgage will have to be aged between 65 and 85, GSB president Chatchai Payuhanaveechai said.
Those who apply for the home loan when they turn 80 will get higher monthly annuity payments from the lender over a five-year period than those aged 65, given the shorter payment period, he added.
The maximum age of reverse mortgage borrowers is based on the average life expectancy of Thais.
The loan is capped at 70% of the home value, while interest rate will be based on minimum lending rate.
Reverse mortgage is a part of the government's plan to strengthen the retirement safety net as Thailand becomes an ageing society.
The Fiscal Policy Office estimates that the percentage of Thais aged 60 and over is expected to increase from 14% of the population now to 17.5% in 2020, 21.2% in 2025 and 25.2% in 2030.
Reverse mortgages allow elderly homeowners to convert their home equity into cash with no repayment of the loan until the borrower dies or the home is sold to help them cover monthly living expenses and healthcare costs.
Lenders of reverse mortgages will make monthly payments to the borrowers, who are still able to live in their homes until they pass away or the loans are fully taken out.
Mr Chatchai said if homeowners are still alive when they turn 85, reverse mortgage borrowers can request the GSB to review their collateral value, which is likely to be higher than when they started the borrowing. They then will be eligible to receive additional loans.
If homeowners die at age 85 or younger, the lender will sell the property and pay its profit to the deceased's heirs, he said, adding that heirs will also be able to buy back the homes.
Mr Chatchai said in cases where no heirs have expressed intent to purchase the homes, this would create greater risk for the bank. However, the magnitude of the risk is low as the mortgage amount is limited to only 70% of the collateral value, he added.
Another hiccup is that borrowers will not pay interest on the due dates, but only after they receive monthly payments from the bank, making it uncertain if these would be classified as non-performing loans (NPLs), he said.
GSB will seek clarification on the NPL issue from the Bank of Thailand before launching the service, said Mr Chatchai.