AGEING-IN-PLACE IN SINGAPORE: HOW USEFUL WOULD REVERSE MORTGAGES WITH NNEG BE?

Abstract

For asset-rich but cash-poor Singaporeans that have a desire to age-in-place, home equity release products can help fund their retirement needs. Yet, pre-existing schemes in Singapore, such as the Lease Buyback Scheme (LBS) and reverse mortgages without No Negative Equity Guarantees (NNEG), are or were unpopular. This thesis explores if the introduction of reverse mortgages with a fairly-priced NNEG will improve the expected utility of a Singaporean who faces uncertainty in his flat's value at the time of his death and serve as a better home equity release product. Results obtained from an intertemporal optimization model suggests that this product will benefit Singaporeans more than pre-existing alternatives. This is because it allows individuals to borrow a larger loan-sum and benefit from appreciation in their flat value while being protected against downside house price risks, as suggested by related studies. Further, results quantitatively justify the low take-up rate of LBS.