SINGAPORE – On Monday (Aug 16), DBS launched a new Home Income Loan to help seniors use their fully paid private homes to increase their retirement income.
This is an illustration of how it works:
A married couple, Mr. Lee, 70, and Mrs. Lee, 65, have a fully paid apartment in a condominium. They want a retirement income of $ 1,300 a month each.
But now Mr. Lee only has $ 650 through Life Payments from the Central Reserve Fund (CPF), and Mrs. Lee has $ 450. Mr. Lee will need another $ 650 and Mrs. Lee another $ 850.
First, to take out a loan, an appraisal of the value of your own home will be done.
The loan amount will then be calculated to help them achieve their desired CPF Life benefits. In this case, Mr. Lee needs $ 115,000 and Mrs. Lee $ 175,000, so they need to borrow a total of $ 290,000.
Once the loan is approved, they will receive the top-up amounts into their respective CPF retirement accounts. They then ask the CPF Council to increase their CPF Life payments.
In 30 years, they will have to pay $ 540,560, including 2.88% per annum.
Perhaps then they will be ready to sell their condominium, since Mrs. Lee will be 95 years old. The proceeds from the sale of the apartment can be used to pay the lump sum for the loan.