Uniquely Singapore, F1 or F9: HDB Lease Buy-back?

By Leong Sze Hian

I refer to the article “HDB unveils ‘income for life’ scheme for the elderly” (ST, Feb

The HDB will pay $87,000 plus a $10,000 government subsidy ($5,000 cash + $92,000 to CPF Life), for the balance 40 years of the lease, on a flat with a 70-year lease.

In a normal reverse mortgage, the cash withdrawals are charged interest like a loan, which is offset against the market value of the home at death.

Using a loan rate of 5 per cent, and a price appreciation of 5 per cent for the HDB flat, the $5,000 initial lump sum, and $500 monthly from age 65 (CPF Life start age) to 92 (end of 30-year lease), will incur a liability of $365,357, and the flat’s $200,000 value would have appreciated to $864,388.

Does this mean that the HDB, in a sense, may stand to gain about $498,731 ($864,388 – $365,357)?

In other countries, a reverse mortgage also typically allows one to stay for as long as one lives, instead of for 30 years.

Why would somone need to pay HDB to extend the lease if he or she is still alive, after 30 years, when the net balance value of the flat is $498,731?

How likely is it for a lower-income Singaporean staying in a 2 or 3-room flat, to be able to afford to pay for the lease extension?

Thus, many may end up losing their homes, and moving to a HDB rental flat and pay rent, which may go against the very reason why they chose the reverse mortgage in the first place – to be able to stay in their own home.


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