Monday, August 20, 2007

Two ways to monetarise your flat

A journalist asked me, "Is it better for a HDB flat owner to take a reverse mortgage or sell of the tail of the lease back to HDB?"

My reply is, "They serve two different needs".

If the owner needs some money and has not decided on what to do with his future home, it is better to take a reverse mortgage. This is a temporary arrangement. He can repay the loan when he decides to sell his flat.

If the owner is certain that he wish to keep the current flat, and be needs money to spend, then it is better to sell of the tail of the lease. I estimate that he can get between 33% to 40% of the current value of the flat. This arrangement is likely to be permanent. He will find it difficult to sell the flat, if the remaining lease is only 30 years.

Both methods cater to different groups of people.

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