The state-owned Government Savings Bank (GSB) will charge an annual interest rate of 5-6% for reverse mortgages, which are set to be launched this week, its chief says.
The bank targets lending of 10 billion baht for the product, and the interest rate will be charged after borrowers turn 85 or pass away, said chief executive and president Chatchai Payuhanaveechai.
The lending target is relatively high as the loans are expected to receive a warm welcome from the elderly, as many are in need of funds, he said.
Reverse mortgages allow elderly homeowners to convert their home equity into cash with no loan repayments until the borrower dies to help cover monthly living expenses and healthcare costs.
People aged 60-85 will be entitled to receive the loan.
The state-owned bank provides up to 70% of the appraisal value for residences and the bank will make monthly payments to allow the elderly to afford their expenses until they turn 85.
After the loan is completely doled out or the borrower passes away, heirs or borrowers can choose to buy back the homes. In case the heir or borrower does not want to buy the home back, it will put it up for sale. If the home is sold for more than the value of the loan, the bank will return the difference.
If the borrower lives to be 85, they can ask the bank to review the home's collateral value with the aim of receiving additional loans, as collateral value normally increases with time.
Reverse mortgages are one part of the government's plan to strengthen the retirement safety net as Thailand becomes an ageing society.
The government has forecast that the number of people aged 60 and over will represent 16.8% of the population in 2020, rising further to 20% in 2025 -- up from 13.8% in 2015.
The government is keen on widening the retirement safety net for Thais as society ages, helping the elderly live comfortably while reducing their fiscal burden. Other measures include setting up the National Savings Fund -- a voluntary pension fund for non-formal workers -- and a mandatory provident fund.
