‘Ekonomichna Pravda’ (‘The Economic Truth’) media outlet analyzes the critical state of the pension system in Ukraine and the probability of the use of one of alternative tools – the reverse mortgage. CASE Ukraine`s experts told whether it is a promising way to Ukraine.
The average retiree is on the verge of poverty, getting about $ 2 a day, and this is an absolute poverty line, according to international standards. In addition, pensioners live below the national poverty line set by the cost of living. The average pension is UAH 1828, and a living wage for persons unable to work is UAH 2500. It does not allow pensioners to live a normal life.
What does a reverse mortgage give? This is a credit which is not refundable. What is the reverse mortgage`s benefit to the recipient?
There are several pros and cons of reverse mortgages.
The disadvantages are as follows:
1) If a person has used funds provided by the bank, then he/she must pay the insurance and maintain housing in good condition out of pocket;
2) Bind to housing is also present: a person cannot move to children or grandchildren. The absence of the person in the apartment, who accesses the reverse mortgage, should not exceed 12 months.
3) The bank can return at most 60% of the cost of housing; the remaining funds will be used for interest and insurance payments.
The advantages are as follows:
1) The opportunity to use the cost of housing and here at not to lose it.
2) There is no additional responsibility of the loan. If the property balance has run out (it is minus for individuals), the person washes hands with an affair.
3) Funds obtained from the reverse mortgage are not taxed.
According to experts, if this tool will be well-received by Ukrainians, it will start working only after stabilization of the economy, currency and inflation reducing. Otherwise the risks will be significant, and the banks are unlikely to consider investing in such projects.