Written by: Peter Tsang
What is a reverse mortgage?

A reverse mortgage is a loan arrangement between the borrower and the bank. The borrower uses his/her self-occupied residential property in Hong Kong as security to borrow money from a bank. The borrower receives monthly payments over a fixed period to improve his quality of life.

Why reverse mortgage?
  1. Flexible payment term

    The borrower can choose to receive monthly payouts for either a fixed period of 10, 15 or 20 years, or for his entire life, according to his needs. The borrower may at any time during his existing payment term apply to switch to another payment term.
  2. Lump-sum loan

    In addition to monthly payouts, the borrower may apply to borrow a lump-sum amount for a specific purpose, such as to fully repay an existing mortgage, to pay for repair or maintenance to his home, to pay for medical expenses and or to pay for the fees payable to solicitors and medical practitioners in connection with the execution of enduring power of attorney or the fees in connection with the application for a Court Order under Part II of the Mental Health Ordinance.
  3. Living in the borrower’s own home

    The borrower remains the owner of the property, and is entitled to live in his/her home for the rest of his/her life.
    If there are two borrowers and one of the borrowers has passed away, the surviving borrower is entitled to continue to live in the property for the rest of his/her life.
  4. No repayment during the borrower’s lifetime

    The borrower does not need to repay the outstanding amount owing to the bank during his/her lifetime, unless the reverse mortgage loan is terminated under certain specified circumstances, such as his/her moving out of the property.
  5. No penalty for early full repayment

    The borrower may repay the outstanding loan amount in full to redeem the property at any time with no penalty.
  6. Six-month cancellation period

    If the borrower wishes to terminate the reverse mortgage loan for whatever reason, provided that he notifies the bank within the first 6 months and repays in full the outstanding loan amount on the proposed repayment date, he will be given a refund and waiver of all the mortgage insurance premiums upon request. However, the borrower needs to bear any accrued interest and financed fees in the outstanding loan amount and also the relevant legal fees in relation to the termination of the reverse mortgage loan.
  7. Preferential right to repay

    Upon the death of the borrower, the estate of the borrower has a preferential right to repay the reverse mortgage within a certain period to redeem the property.

Who is eligible?

The borrower must:
  • be the holder of valid Hong Kong Identity Card;
  • be aged 55 or above; and
  • not be an undischarged bankrupt or otherwise subject to a bankruptcy petition or individual voluntary arrangement.

The property used for the reverse mortgage:
  • must be held in the name of the borrower, or in the joint names among the borrower and up to 2 co-borrowers as joint tenants;
  • must not be more than 50 years older subject to any resale restrictions;
  • must not be rented out unless with the bank's written approval; and
  • must be occupied by the borrower as his principal residence in Hong Kong.
** Properties over 50 years old are considered on a case-by-case basis and subject to building inspection.

  • The maximum number of borrowers is three persons, which can be spouses, siblings or unrelated parties.
  • If one person owns a property jointly with another person, both owners must be parties to the reverse mortgage loan.
  • All borrowers must be able to satisfy the relevant eligibility criteria.

Lump-sum loan

When the borrower applies for a reverse mortgage, the bank will specify in the facility letter the maximum and minimum lump-sum that may be borrowed at the time of application. These maximum and minimum amounts will be reduced during the payment term. Each time a lump-sum is borrowed, the monthly payment is reduced.

What costs is the borrower responsible for?

The borrower is responsible for:
  • interest expense;
  • mortgage insurance premium;
  • counselling fee;
  • administrative fee;
  • legal fee;
  • registration fee; and
  • other fees and expenses.

How much does the borrower receive every month?

The borrower receives a fixed monthly payment, whose amount depends on:
  1. the term of the annuity payment;
  2. the age of the borrower; and
  3. the value of the property.

For every HK$ 1 million of the property's value, the monthly payment for borrowers at the entry age of 55, 60 or 70 are as follows: Term of annuity payment Amount of monthly annuity payment (HK$)
Term of annuity payment Amount of monthly annuity payment (HK$)
One borrower
55 years old 60 years old 70 years old
10 years $3,200 $3,700 $5,100
15 years $2,400 $2,800 $3,800
20 years $2,050 $2,400 $3,300
Life annuity $1,650 $2,000 $3,100
Term of annuity payment Amount of monthly annuity payment (HK$)
Two borrowers
55 years old 60 years old 70 years old
10 years $2,800 $3,300 $4,600
15 years $2,150 $2,500 $3,500
20 years $1,800 $2,100 $3,000
Life annuity $1,450 $1,800 $2,800
Term of annuity payment Amount of monthly annuity payment (HK$)
Three borrowers
55 years old 60 years old 70 years old
10 years $2,500 $3,000 $4,200
15 years $1,900 $2,250 $3,200
20 years $1,600 $1,900 $2,700
Life annuity $1,250 $1,550 $2,400

For other ages, please visit HKMC website to determine the monthly payout.

On 16 November 2012, the maximum property value for payout calculation was increased to HK$15 million. For properties worth over $8 million, a discount is applied in computing the specified property value. For any property valued at HK$25 million or above, the maximum specified property value for payout calculation is capped at HK$15 million.

How to calculatethe monthly annuity payment if one borrower is 60 years old and the co-borrower is 70 years old

When there are two borrowers, the annuity payment will depend on the age of the younger borrower.
  Example 1 Example 2 Example 3
Borrower(s) and entry age One borrower aged 70 Two borrowers, one 70 and the other 60 Two borrowers, both 70
Payment term Life Life Life
Property value (HK$) $2.5 million $2.5 million $9 million
Monthly payout (HK$) $3,100 x 2.5 = $7,750 $1,800 x 2.5 = $4,500 $2,800 x 8 = $22400

Example 2

When there are two borrowers, the amount of the monthly annuity payment will depend on the age of the younger borrower. The entry age of the younger partner is used for calculation.

Example 3

The property value used for calculation is capped at HK$8 million. Even though the property value in this example is HK$9 million, the monthly payment will be determined as if the property were worth HK$8 million

Borrower may use the Reverse Mortgage Calculator designed by the HKMC to estimate the amount of mortgage one can get.

Assignment of life insurance policy

The borrower may choose to assign his life insurance policy to the bank as extra collateral in addition to his residential property under a reverse mortgage. The additional collateral will increase the amounts of monthly and lump-sum payouts of the reverse mortgage loan. The amount recoverable under a life policy assignment to be used by the bank for repayment of reverse mortgage loan is limited to the cash surrender value of the life insurance policy.

There is no limit on the number of life insurance policies for assignment but the aggregate amount of cash surrender value is capped at the specified property value of the property under the reverse mortgage loan.The assignment can be made at the time of application for a reverse mortgage loan or at any time before the reverse mortgage loan is terminated.

The option of life insurance policy assignment is available only when the number of borrower is not more than two. It is necessary that the beneficiary of the borrower's life insurance policy be the borrower himself or his own estate in the case of a single-borrower application, or the co-borrower in the case of a joint-borrower application. The borrower is required to arrange with his insurance company to change the beneficiary as necessary.

In general, when the reverse mortgage loan terminates and the sale proceeds from the property are insufficient to repay the total outstanding loan amount in full, the bank will apply the payment derived from the life insurance policy, up to the then available cash surrender value, to recover any shortfall. However, if any shortfall still remains after such repayment, it will be borne by the HKMC under an insurance arrangement between the bank and the HKMC. In any case, any surplus after full repayment of the reverse mortgage loan shall be returned to the borrower (or his inheritors).

The borrower may apply for the release of his life insurance policy assigned to the bank under the reverse mortgage loan at any time subject to the payment of a handling fee. There is no penalty for such release.

Eligibility Criteria for Assignment of Life Insurance Policy

In general, the life insurance policy must:
  1. be taken out by the borrower as both the policyholder and the insured;
  2. be issued by an authorized insurer in Hong Kong;
  3. be denominated in Hong Kong Dollars or United States Dollars;
  4. have accrued a cash surrender value which is non-decreasing for the remaining term;
  5. have the premium fully paid-up by the policyholder (Note);
  6. not be associated with any investment features; and
  7. be assignable and not contain any restriction on change of beneficiary

(Note) If the borrower's life insurance policy has not been fully paid up and/or has a policy loan granted by the insurance company, the borrower may apply to borrow a lump-sum payout to fully pay up the life insurance policy and/or repay the policy loan at the time of application for assignment.

When does the reverse mortgage terminate?

The reverse mortgage terminates when:
  • the borrower repays the loan in full;
  • the borrower voluntarily delivers vacant possession of the property to the bank to allow the bank to sell the property for the borrower;
  • the property is no longer the borrower’s principal residence in Hong Kong;
  • the borrower has passed away, or in the case of a joint reverse mortgage, both borrowers have passed away;
  • the borrower, or in the case of a joint mortgage, one or both borrowers, is adjudged bankrupt or becomes the subject of an individual voluntary arrangement; or
  • other circumstances occur.

What happens to the property at the end of the reverse mortgage?

At the end of the reverse mortgage, the borrower (or his inheritor(s) if the borrower has passed away) has the preferential right to redeem the property by repaying the loan in full to the bank.

If the borrower (or his/her inheritor(s)) chooses not to exercise this right, the bank will sell the property to recover the outstanding loan amount.

If the sale proceeds from the property exceed the outstanding loan amount, the bank will return the surplus to the borrower (or his/her inheritor(s)) after paying off the outstanding loan in full.

If there is any shortfall, it will be borne by the HKMC under an insurance arrangement between the bank and the HKMC.

Application procedures

Step 1 – Pre-application
The borrower needs to enquire at a participating bank, which will provide the borrower with details about the reverse mortgage programme and conduct a preliminary eligibility assessment for him.

Step 2 – Counselling
Before making a formal application, the borrower must make an appointment with an qualified Counsellor.
The Counsellor will explain the general features of the reverse mortgage, the borrower's major legal rights and obligations, and the legal consequences of taking out a reverse mortgage. The Counsellor will issue a counselling certificate to the borrower if he successfully completed the counselling session.

Step 3 – Formal application
After obtaining the counselling certificate, the borrower may approach any participating bank to make a formal application.

Step 4 - Execution of legal documents
If the formal application is approved by the bank, the borrower will need to execute the mortgage documents in order to start receiving the monthly payments.

If you have any enquiries, please contact any participating bank, a qualified Counsellor or the HKMC for more information. You can also call the Reverse Mortgage Programme Hotline: 2536 0136.