Pilot Program to Allow Retirees to get Bank Loans Using their Homes as Collateral
The China Insurance Regulatory Commission said that the country is now allowing retirees to get bank loans against their homes so that they can pay for their living expenses based on a pilot programs that will be implemented in four cities. Although these home equity loans or reverse mortgages is relatively new to China but is already common in Western countries, in which homeowners are allowed to borrow money using their homes as collateral. For elderly seniors, the insurers lending the money will recover the loans or property after death.
The four cities namely Shanghai. Beijing, Wuhan and Guangzhou is starting a two year experiment starting in July in which people 60 and above owning their own homes will be eligible for the bank loan. These reverse mortgages with help them in broadening their financial resources and expand the types of retirement services that are offered by insurers.
The program allows for a new way in proving for old age care and participants will only be allowed to borrow a portion of the value of their homes. Insurers that are willing to participate in the pilot program must be in business for five years and with a registered capital of 2 billion yuan.
Last year the country released a proposal for the program, but gather doubts some experts who think the program will be effective since all private home ownership in the country is capped at 70 years and based on tradition some of these homes are passed on as inhertitance.