-Written by Kwon Min-jung
Influenced by the 2008 financial crisis, Korea’s real estate market has been depressed for several years. The main counter plans of the government were supporting house poor, preventing another ‘sub-prime mortgage’. As a result, bank loans for house poor have been relieved much, including pre-workout system for house debtors. However, many experts are criticizing the measure, in that those are not fundamental solutions. Though financial difficulty of house poor is one of the causes of depressed market, the essential problem is the slowdown of transactions in the real estate market. Experts say that relieving regulations is the most urgent measure because the biggest obstacle in activating the Korean real estate market is strict regulation.
On the other side of such criticisms, there is a measure which hears favorable accounts: Pre-application of housing reverse mortgage. Pre-application of housing reverse mortgage is a system that repays housing mortgage loan with future pension. As a result, house poor can live in their own house throughout their life and the debt will be fully repaid on securities of their house. That means the system lightens financial burdens of house poors upon application of the system and provides residential stability to house poor at the same time.
Pre-application of housing reverse mortgage has different application conditions from the existing housing reverse mortgage. While application of the previous housing reverse mortgage had been only allowed to seniors older than 60, pre-application of house reverse mortgage is open to those older than 50. And while the former is subject to houses below 9 billion won, the latter is subject to those below 6 billion won. And whereas the former doesn’t have any application due date, the latter is only applicable during one year starting from June 1, 2013.
Though the system is a temporary measure and has relatively strict application conditions, experts expect that pre-application of house reverse mortgage will greatly act as a relief of the house poors and also as a measure to activate the real estate market.