DBS Unveils Market-first Financing Solution for Seniors with Private Residential Properties

The DBS Home Equity Income Loan enables seniors to unlock their housing equity and receive payouts via CPF LIFE

Pilot solution comes with a fixed rate of 2.88% p.a. for up to a loan period of 30 years

DBS introduced a market-first financing solution for seniors owning private property in Singapore – the DBS Home Equity Income Loan (DBS EIL). The solution, which is being piloted, allows Singaporeans and Permanent Residents aged 65 to 79, to borrow against their fully-paid private residential property to top up their CPF Retirement Sums which will be used for the CPF LIFE^[1] scheme, allowing them to receive monthly payouts to supplement their retirement funds for as long as they live.

Said Shee Tse Koon, DBS Singapore Country Head, “With Singapore’s rapidly greying population, we see a growing need for robust, relevant and innovative retirement planning solutions. The average homeowner above 50 years old here holds some 60% of their wealth in housing equity.^[2] Many homeowners also prefer to remain in their own homes and be in familiar surroundings. DBS EIL was introduced as an option to help seniors unlock the value of their homes safely, and we adopted a collaborative approach to come up with this solution. Unlike other property decumulation loans, DBS EIL enables borrowers to receive guaranteed monthly payouts for the rest of their life, something that would not have been possible without the existence of the CPF LIFE scheme.”

Key features of DBS EIL

DBS EIL is available to Singapore citizens and permanent residents aged 65 to 79, and who own and live in a fully paid up private residential property in Singapore. Designed with comprehensive safeguards to protect borrowers’ interests, DBS EIL aims to help seniors unlock the value of their housing assets while being able to continue living in their homes. Key features and benefits include:

Loan period of up to 30 years – till the customer (or youngest borrower in the case of a joint loan) reaches 95 years old.

• Fixed interest rate of 2.88% p.a. throughout the loan period

• No monthly loan repayments, with the loan amount and accrued interest payable only at loan maturity

• The long loan period also means that customers retain the flexibility to sell their property anytime if they so wish, and to repay the loan without penalty fee

DBS EIL also comes with the following commitments and safeguards to further protect borrowers’ interests:

• Ensuring financial prudence: The maximum amount that can be borrowed by an individual is the amount required to top up to the current CPF Enhanced Retirement Sum (SGD 279,000 in 2021)^[3]. This reduces the risk of borrowers or their estates being unable to repay the loan at the end of the loan period

• To qualify for the loan, borrowers are required to set up a Lasting Power of Attorney (if they do not have one), which will allow the borrower to appoint one or more persons to make decisions and act on their behalf should they lose mental capacity

• If the value of the property declines during the loan period, borrowers are not required to make any payment to reduce the outstanding loan amount if there is no event which triggers early termination of the loan

• If there is an early termination of the loan (such as borrowers passing on during the loan period) or if borrowers outlive the loan, DBS will further commit to not repossessing the property until after it exhausts all other mutually acceptable options with the borrower or their estate

For an illustration of how DBS EIL works, kindly refer to the appendix.

Said Ms P’ing Lim, Head of Deposits, Financing Solutions & Ecosystems at DBS Consumer Banking Group (Singapore), “We wanted to provide a solution that could tangibly address existing gaps in the market in a sustainable manner, one that could provide retirees surety and stability while working as a pre-emptive measure to help them plan for their future. We considered that the long loan period, coupled with steady retirement income, ensures retirees will be well placed to decide what they want to do next with their property, whether it’s to time the market to sell, to rent out a room, downsize, or transfer the property to their successors when they pass on.”

“DBS EIL was designed after listening closely to the concerns, needs and wants raised by older homeowners, researched similar examples in other developed nations, looked at what worked (and what didn’t) before we arrived at this solution, unique to Singapore. Ultimately, DBS EIL also represents DBS’ strong commitment towards helping Singaporeans retire well and with security.”

For more information on the DBS Home Equity Income Loan, please visit www.dbs.com.sg/personal/loans/homeloans/dbs-home-equity-income-loan.

DBS EIL is part of the bank’s suite of retirement planning solutions to help customers retire well by decumulating wisely. While customers are usually in the asset and wealth accumulation phase, there comes a point when they retire and their focus shifts to decumulation: when customers begin to convert their savings, investments and other retirement benefits into sustainable income that can fund their needs and wants. This is where solutions such as DBS EIL and Schroder Asia More+, a multi-asset fund managed by Schroders Singapore and distributed exclusively by DBS, can help customers decumulate optimally for a more secure financial future.

^[1] The CPF Lifelong Income For The Elderly (“CPF LIFE”) Scheme is a national longevity insurance annuity scheme that provides Singapore citizens and permanent residents a monthly payout for as long as they live
^[2] Source: Joelle H. Fong, Olivia S. Mitchell and Benedict S. Koh, “Asset-Rich and Cash-Poor: Which Older Adults Value Reverse Mortgages?”, 25 June 2020, Wharton Pension Research Council Working Paper No. 2020-23, link
^[3] The Current Enhanced Retirement Sum is updated annually. The minimum loan amount would be the amount needed for borrowers to top up their CPF funds to meet the Full Retirement Sum for their cohort

APPENDIX – How DBS EIL works

Source: DBS Bank