DBS Group Holdings has unveiled the DBS Home Equity Income Loan (DBS EIL), which allows Singaporeans and permanent residents (PRs) aged 65 to 79 years to borrow against their fully-paid private residential property to top up their CPF Retirement Sums on Aug 16.
The CPF Retirement Sums will be used for the CPF Lifelong Income for The Elderly (CPF LIFE) Scheme, a national longevity insurance annuity scheme that provides Singapore citizens and PRs with a monthly payout for as long as they live.
The financing solution is the first of its kind in the market. It aims to help seniors unlock the value of their housing assets while allowing them to continue living in their homes.
The loan period will be up to 30 years till the customer – or the youngest borrower in a joint loan – reaches 95 years old.
Customers can borrow a maximum sum of $279,000 in 2021, which is the current limit for topping up the CPF Enhanced Retirement Sum.
The interest rate is fixed at 2.88% per annum (p.a.), with no monthly loan repayments.
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The loan amount and accrued interest is payable when the loan matures.
Customers have the flexibility to sell their property anytime if they wish and to repay the loan without a penalty fee.
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If the value of the property declines during the loan period, borrowers are not required to make any payment to reduce the outstanding loan amount if there is no event which triggers an early termination of the loan.
“With Singapore’s rapidly greying population, we see a growing need for robust, relevant and innovative retirement planning solutions. The average homeowner above 50 years old here holds some 60% of their wealth in housing equity. Many homeowners also prefer to remain in their own homes and be in familiar surroundings,” says Shee Tse Koon, country head at DBS Singapore.
“DBS EIL was introduced as an option to help seniors unlock the value of their homes safely, and we adopted a collaborative approach to come up with this solution. Unlike other property decumulation loans, DBS EIL enables borrowers to receive guaranteed monthly payouts for the rest of their life, something that would not have been possible without the existence of the CPF LIFE scheme,” Shee adds.
According to DBS Consumer Banking Group’s head of deposits, financing solutions and ecosystems P’ing Lim, the bank wanted to provide a solution that could tangibly address existing gaps in the market in a sustainable manner, one that could provide retirees surety and stability while working as a pre-emptive measure to help them plan for their future”.
“We considered that the long loan period, coupled with steady retirement income, ensures retirees will be well placed to decide what they want to do next with their property, whether it’s to time the market to sell, to rent out a room, downsize, or transfer the property to their successors when they pass on,” Lim writes.
“DBS EIL was designed after listening closely to the concerns, needs and wants raised by older homeowners, researched similar examples in other developed nations, looked at what worked (and what didn’t) before we arrived at this solution, unique to Singapore. Ultimately, DBS EIL also represents DBS’ strong commitment towards helping Singaporeans retire well and with security,” Lim adds.
As at 12.26pm, shares in DBS are trading 24 cents lower or 0.8% down at $30.74.
Photo: Bloomberg
