At April 6the CASE Ukraine Center for Social and Economic Research presented a study ‘Reverse Mortgage As a Financial Instrument For the Elderly People’.
The reverse mortgage is providing monetary support for elderly people, who own the property, but feel the lack of money in everyday life. This is a loan, which is provided against security of immovable property. After the death of its recipient, the lender gets the right to a refund through the heirs` repaying the loan or selling property on the market.
‘Most of our seniors do not have sufficient financial instruments to ensure a decent retirement in contrast to the US, where older people can have savings in the form of contributions to pension funds, investment companies, banks, etc., – study`s author Dmytro Koloda explains a significance of the question. – In Ukraine, a reverse mortgage may be one of the solutions’.
‘When we talk about pension reform, there is a kind of a ‘crisis of the genre’, CASE Ukraine`s CEO Dmytro Boyarchuk said. – All proposals are reduced to cutting the deficit of the Pension Fund, which now accounts for half of the Fund`s expenses, that is or 5.5% of GDP. However, not any version of pension reform speaks of a real increase in the welfare of the elderly people.
Moreover, not any reform can guarantee an even minimally secured retirement for those over 30 years. That’s why we paid attention to the reverse mortgage which is certainly not a panacea, but no worse than a retirement accumulation account. Do you have property earned by life? In old age you can receive up to $ 200 monthly. That is very well in our context’.
Among the advantages of this tool the CASE Ukraine economists define: an opportunity to take advantage of the cost of housing to improve the person`s well-being without leaving it; no need to repay the loan as long as the person does not decide to leave or joins the majority; reverse mortgage`s flexibility of payments (one-time, periodically, credit line, combined); funds received by reverse mortgage will not affect the intended social benefits and others.
‘There are a number of favorable factors on the Ukrainian market: an aging population, low life expectancy, low pensions, availability of the lonely elderly people, who own housing’, – study’s author, CASE Ukraine economist Andriy Dub, said.
However, the successful launch in Ukraine of such financial services needs several conditions, CASE Ukraine`s CEO Dmytro Boyarchuk says. ‘The economic and financial situations should stabilize: inflation should be closer to 5-6% per year, and the economy must grow’, the expert clarifies.