Singaporeans and Singapore Permanent Residents aged 65 to 79 will be able to borrow against their fully paid private homes to top up their CPF Retirement Sums that will be used for the CPF LIFE scheme.
Seniors owning private property in Singapore can now take up a loan against their homes to supplement their retirement funds.
Under the DBS Home Equity Income Loan (DBS EIL), Singaporeans and Singapore Permanent Residents aged 65 to 79 will be able to borrow against their fully paid private homes to top up their CPF Retirement Sums that will be used for the CPF LIFE scheme – enabling them to receive higher monthly payouts.
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The maximum amount that could be borrowed by an individual is the amount needed to reach the present CPF Enhanced Retirement Sum, which stands at $279,000 this year.
The loan period may be up to 30 years till the customer, or the youngest borrower in case of a joint loan, reaches 95 years old. The loan comes with a fixed interest rate of 2.88% per year.
Seniors who take up the loan need not worry of monthly loan repayments as the loan amount and accrued interest are payable only at loan maturity.
They can also sell their property anytime they want as well as to repay the loan without a penalty fee.
“If the value of the property declines during the loan period, borrowers are not required to make any payment to reduce the outstanding loan amount if there is no event which triggers early termination of the loan,” said DBS.
In the event of early termination of loan due to the borrowers’ death, for instance, DBS will not repossess the property until all other mutually acceptable options have been exhausted.
P’ing Lim, DBS’ Head of Deposits, Financing Solutions and Ecosystems, said the new scheme addresses existing gaps within the market, while working as a pre-emptive measure to help seniors plan for their future.
“We considered that the long loan period, coupled with steady retirement income, ensures retirees will be well placed to decide what they want to do next with their property, whether it’s to time the market to sell, to rent out a room, downsize, or transfer the property to their successors when they pass on,” she said.
“DBS EIL was designed after listening closely to the concerns, needs and wants raised by older homeowners, researched similar examples in other developed nations, looked at what worked (and what didn’t) before we arrived at this solution, unique to Singapore. Ultimately, DBS EIL also represents DBS’ strong commitment towards helping Singaporeans retire well and with security.”
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email: victorkang@propertyguru.com.sg
