Ageing phenomenon has been rapidly proliferating worldwide due to demographic change. Concerning the change, United Nations Secretary-General once mentioned in a speech at the Second World Assembly on Ageing held in Madrid, Spain on April 8, 2002 that this ageing phenomenon will transform human life into completely different one from now.
Also, World Health Organization(WHO) warned that the ageing process which has been in progress quietly and inconspicuously would eventually take on a momentum to turn a social reform 25 years from now and estimated that the tables will be completely turned around by the year 2050 as population aged above 60 will outnumber population of children aged below 14.
According to recent data from the National Statistical Office(NSO), even South Korea has entered into an ageing society in 2000 as population aged 65 and over accounted for 7.2% of the entire population, and it is predicted to move into a super-aged society by 2026. Plus, economic activity rate of population aged 65 and more accounted for 30.6% while job seekers aged between 65 to 79 accounted for 41.8% in 2008. Thus, it implies that self-reliance of the elderly is in a very vulnerable state and civil systems for their later life preparation is quiet insufficient, which urgently calls for effective systems that will paly a crucial role in guaranteeing old age life in national, corporational, and individual level.
In light of this, roles of financial services as in risk allocation for individual assets have been emphasized more than ever and as part of it, financial items such as housing reverse mortgages and mortgage loans - which a financial institution offers by holding a mortgage on house property - can play important roles in securing livelihood of the aged.
Therefore, this study deals with a comparative analysis on reverse mortgage loans and mortgage loans in order to pave a path for activation of real estate financing.
In terms of stability of older life, a fact-revealing analysis is made on how much progress has been made for the last six years since the housing reverse mortgage system was adopted by Korea Housing Finance Corporation on July 12, 2007. At the same time, the current status and trend of the nation's housing mortgage loan market are examined and the operation characteristics in the market such as types and levels of the interest rate are analysed seeking to enhance improvement on these two types of financial items.
The fact-revealing analysis was conducted through surveys based on theoretical consideration and advanced researches, which has drawn a range of findings.
To begin with, the findings concerning the improvement on the activation of practical housing reverse mortgages are as follows.
First, it is revealed that the monotonous methods of current loan provision needs to be diversified.
Second, the age limit - a householder should be over 60 - of monthly provision for housing reverse mortgage applied in advance needs to be eased.
Third, the restriction that only single residence owners can apply for the loan should be abolished so that multi-house owners can be allowed for the loan.
Fourth, it is required to abolish price restriction for houses costing below 900 million won and extend the coverage to all kinds of real estate.
Fifth, it is necessary to ease the age restriction - an applicant should be over 60 - for the general housing reverse mortgages.
Sixth, more diverse tax benefits such as income deduction should be provided to a low-income group or children of the borrowers.
Next, findings concerning the improvement to activate mortgage loans are as follows.
First, it is needed to improve on the high level of interest rate, adjustable rate oriented method of loan, additional expenses paid by borrows-such a case as a borrower charged with a fee when paying off a mortgage
Second, as for the short-term or bullet payment methods, it can risk principal redemption in times of financial market crisis-such as stagnation of real estate - so it is necessary to develop financial items with various methods of redemption like long-term, mid-term, or partial redemption including gradual increase or diminishing balance methods as well.
Third, it is required to apply differentiated additional interest rate based on a credit rating and level of contribution of a financial institution
Fourth, the deduction of small amount of deposit due to credit limit set based on numbers of room should be eased.
Fifth, the credit limit due to LTV restriction should be improved to be applied differentiatedly according to credit ratings
Sixth, the current terms and conditions of tax benefits that are applied to over 15 year-period should be improved. Also, it is necessary to reduce interest rates and increase the credit limit for those who own low priced houses and low income households - including multi-cultural families, multi-child families, elderly households, and the disabled.
This study has a significance for providing basic materials in order to accomplish advanced finance policies along with social welfare services as suggesting measures to improve and activate real estate financing through the findings out of the fact-revealing analysis conducted as above.