Reverse Mortgage Quietly Scales Up... Outstanding Guarantee Balance Grows by 2.1 Trillion Won in a Year

Increased from 12.5 Trillion Won to 14.6 Trillion Won Over the Past Year

More Elderly Homeowners Facing Cash Shortages

Attention on Effects of Monthly Payment Increases and System Reforms

Calls for Further Easing of Subscription Requirements

With the growing number of elderly people who own homes but lack readily available cash, the utilization of reverse mortgages continues to expand. As the monthly payments and individual withdrawals paid to existing subscribers accumulate along with guarantee fees and interest, the outstanding reverse mortgage guarantee balance at Korea Housing Finance Corporation has increased by over 2 trillion won over the past year.

According to the financial sector on July 23, the outstanding balance of the individual guarantees in the reverse mortgage pension guarantee account at Korea Housing Finance Corporation rose from 12.490798 trillion won at the end of March last year to 14.59615 trillion won at the end of March this year. This represents an increase of 2.105352 trillion won, or 16.9%, in just one year.

The outstanding guarantee balance of reverse mortgages is the sum of the monthly payments and individual withdrawals received by subscribers thus far, together with guarantee fees and interest that are accumulated onto the loan balance rather than paid in cash. The growth in the outstanding guarantee balance reflects not just new participants joining the program, but also the continued pension payments and accumulation of interest and guarantee fees for existing subscribers. This indicates that the scope of reverse mortgage guarantees provided by the corporation has significantly expanded.

A reverse mortgage is a product that allows elderly homeowners to use their homes as collateral and receive a certain amount of money every month while continuing to reside in the property. One member of a couple must be at least 55 years old, and the combined declared price of the homes owned by the couple must not exceed 1.2 billion won. Subscribers can maintain ownership and continue to reside in their homes, and even if one spouse dies first, the surviving spouse can continue to receive the pension.

The underlying reason for the increasing use of reverse mortgages is the growing reality that many elderly people own homes but lack sufficient cash for living expenses. According to an analysis of the household financial welfare microdata from the Ministry of Data and Statistics, about 20% of owner-occupier households aged 60 or older had most of their assets tied up in real estate but not enough income. These households held over 70% of their assets in housing, and their monthly income remained below 3.05 million won, which is the median for the bottom 50% income bracket.

Will the Effect of the Reverse Mortgage Monthly Payment Increase Continue?

Korea Housing Finance Corporation expects that the government's efforts to improve the product will positively impact the future expansion of reverse mortgage usage. From March 1, the government raised the monthly reverse mortgage payments for new applicants by an average of 3.13%. For the average subscriber — a 72-year-old with a 400 million won home — the monthly payment increased by 41,000 won, from 1,297,000 won to 1,338,000 won.

The initial guarantee fee rate has also been lowered from 1.5% to 1.0% of the home's value. For a home valued at 400 million won, the initial fee was reduced from 6 million won to 4 million won. Since June, exceptions have been expanded so that if there are unavoidable reasons such as medical treatment, supporting children, or entering senior housing and welfare facilities, applicants may still qualify even if they do not reside in the mortgaged property.

Following these policy changes, the number of new subscribers rose sharply in March and April. The number of new subscribers was 939 in January, 780 in February, jumped to 1,287 in March when the increased monthly payment was applied, and reached an all-time high of 2,322 in April.

However, it remains to be seen whether this growth trend will continue. In May, the number of new subscribers fell sharply to 1,648 from 2,322 in April. This drop is attributed both to pent-up demand having been concentrated in March and April as applicants waited for the payment increase, and to rising expectations for housing price increases in the Seoul metropolitan area, making homeowners more reluctant to tie up properties as collateral.

The government plans to increase the reverse mortgage subscription rate from the current 2% (as of the end of 2025) to 3% by 2030. Although the total cumulative number of subscribing households stands at around 150,000, authorities believe there is further room for expansion given the concentration of real estate among elderly assets and the current level of senior poverty.

However, some point out that in order to widen the subscription base, it will be necessary to consider either raising or eliminating the current home value ceiling of 1.2 billion won. Under the current system, a significant number of elderly people in Seoul, where home prices are high, could be excluded from eligibility.

Opinions have been raised that for high-value home subscribers, placing a separate cap on the valuation for calculating the pension, as well as introducing more realistic tax support, such as for property tax and registration license tax, will be necessary for maintaining fiscal soundness.

This content was produced with the assistance of AI translation services.