Do you know what is the Skim Saraan Bercagar (SSB) by Cagamas Bhd? Learn more about this reverse mortgage scheme that offers retired homeowners income like a pension every month in this article.
This article was translated from Skim Saraan Bercagar SSB Cagamas: Skim pinjaman untuk warga emas dan apa yang anda perlu tahu by Ashraf Wahab.
Something very common when it comes to the world of real estate is the abundance of schemes designed to encourage young adults to purchase homes.
When it comes to the elderly, their options are usually retirement schemes such as Employees Provident Fund (EPF).
However, have you heard about the reverse mortgage scheme – Skim Saraan Bercagar (SSB)? In this article, we will share everything you need to know about this innovative reverse mortgage concept in Malaysia!
What Is The SSB Reverse Mortgage Scheme?
In a nutshell, this is a reversed loan scheme for retirees and the elderly, where they can use their residential property to generate income every month.
Interestingly, this home loan financing product is the first of its kind in Malaysia.
The SSB was launched by Cagamas Berhad, the National Mortgage Corporation of Malaysia, in collaboration with Employees Provident Fund and the Credit Counselling and Debt Management Agency (AKPK) to help solve the financial problems of many retired homeowners in Malaysia.
The scheme was unveiled in December 2021 and applications for this scheme have been open since 17 January 2022 but are limited to residents in the Klang Valley only. According to a news report, SSB has been gradually gaining traction since its launch.
How Does The SSB Reverse Mortgage Scheme Work?
This scheme is a type of loan which allows retired homeowners to convert their residential property assets into a permanent source of income.
The borrowers can continue to live in the house without making any repayments for the rest of their living days.
However, after the borrower passes away, loan repayments will be made.
The mortgaged property will be sold to settle the outstanding loan amount. Any remaining proceeds from the sale of the property will be handed over as the borrower’s estate.
The borrowers will also not need to worry about any outstanding debts because no claims will be made to the heirs if the generated amount from the house sale is insufficient to cover the outstanding loan amount.
6 Benefits Of The SSB Reverse Mortgage Scheme
Compared to other housing schemes which focus more on the younger crowd, the SSB reverse mortgage scheme is only open to retired homeowners. Other benefits include:
- Applications will be carefully selected based on their financial situation. In fact, before the application is accepted, the applicant must attend an appointment with the EPF and AKPK.
- The homeowners will receive monthly payments, without giving up ownership and get to continue to stay in the house.
- These retired homeowners can generate income from their homes without depending on others, especially at retirement age.
- Repayment of the property only begins after the demise of the homeowner.
- The retirees receive monthly income from the house for the rest of their lives. Therefore, they can enjoy retirement in peace.
- No claims will be made to the heirs if the generated amount from the house sale is insufficient to cover the outstanding loan amount.
READ: Reverse Mortgage vs Refinancing vs Selling – Which Is Better?
4 Reasons To Participate In The SSB Reverse Mortgage Scheme?
Here are a few scenarios where participating the Skim Saraan Bercagar will benefit you:
1) Lack of retirement savings
Some retirees face the problem of a lack of money saved up for retirement. It may come to the point where they have to sell the only remaining property they have — their home, to generate cash.
However, through your home, this scheme provides you with a monthly income for the rest of your life! Furthermore, you can continue to live in that house.
2) Self-financing your lifestyle
During retirement, some will find it hard to make ends meet. The ever-increasing cost of living can put a burden on your finances. The income generated by SSB, in addition to their existing retirement income sources, helps provide a better quality of life throughout the retirement years..
3) Not having to rely on your next-of-kin
The uncertainty of the economy can make it hard for retirees to rely on their next-of-kin or other family members for money.
In fact, it’s not uncommon to read in the news about elderly people being driven out of their children’s homes because they are seen as a financial burden to their children.
At the very least, through this scheme, the elderly will still have shelter and without the need to rely on other family members. Furthermore, this scheme offers them a monthly income.
In other joint-loan concepts, the surviving joint-borrower will have to pay half of the outstanding loan amount. However, with this scheme, the joint-borrower will continue to receive a monthly income and is allowed to live in the house for the rest of their life.
Therefore, applicants will have ease of mind as the joint-borrower of their heirs will not be burdened.
4) Leave a small inheritance to your heirs
Considering that any remaining proceeds from the sale of the property will be handed over as the borrower’s estate, you will be able to leave a small inheritance to your heirs.
What Are The Eligibility Criteria For The SSB Reverse Mortgage Scheme?
As for the eligibility criteria, it is divided into two categories, namely the borrowers and the property itself. Let’s see what the requirements are set for this scheme:
Criteria for the borrower:
- Malaysian
- 55 years old and above
- Owner or joint-owners of a residential property
- For a joint-loan, the joint-borrower can be a partner, parent, sibling or child, subject to the age limit
Criteria for the property:
- Residential property in Malaysia held in the borrower’s or joint borrowers’ name(s).
- For a joint Skim Saraan Bercagar Loan, joint ownership of property is required.
- Property must be owner-occupied and be the primary place of residence.
- Free from encumbrances such as mortgages and other financial liabilities.
5 Steps To Apply For The SSB Reverse Mortgage Scheme?
To apply, the steps are slightly different from other application schemes. Here are some steps that need to be done:
Step 1
Schedule an appointment with EPF at any of the branches below via this link: https://www.kwsp.gov.my/ms/janjitemu
The following are EPF branches in the Klang Valley that can be contacted:
- EPF Kuala Lumpur, Ground Floor KWSP Building, Jalan Raja Laut, 50350 Kuala Lumpur
- EPF Petaling Jaya Services Counter, PJX-HM Shah Tower, Lot A, Ground Level, No. 16A, Persiaran Barat, 46050 Petaling Jaya Selangor
Step 2
Take a pre-assessment test to determine your eligibility. Here is some basic information that you would need to provide:
Personal Details:
- Age of borrower or borrowers (for joint SSB Loan)
Property Details:
- Estimation of property’s market value
- Type of property
- Location of property
- Land title of property (i.e. Freehold or Leasehold)
Step 3
Schedule an advisory appointment with the Credit Counselling and Debt Management Agency (AKPK).
Step 4
Complete the reverse mortgage financial advisory module with AKPK at the nearest AKPK Branch.
Step 5
Once completed, you can submit your SSB application for the Reverse Mortgage Scheme to Cagamas.
Make sure to attach AKPK’s confirmation of attendance form and other relevant supporting documents together with your application.
Although this step seems complicated and long, it is actually important to ensure that you are eligible and suitable to participate in this scheme.
What Are The Costs For The Applicants Of The Skim Saraan Bercagar?
For this scheme, you still need to pay the initial upfront expenses or costs for this loan.
Upon signing up for the SSB Loan, here are some expenses that will be incurred by the borrower.
Initial upfront expenses:
- Legal fees
- Valuation fees
- Property insurance
- Administration fees (if any)
- Servicer fees (if any)
However, the initial expenses above can be financed by the SSB Loan.
How Do You Calculate The Monthly Pension Amount That Will Be Paid To The Borrower?
To determine the monthly payout to the borrower, it will take into consideration the following factors:
- The borrower’s age. In the case of a joint-borrower, the age of the youngest borrower will be used.
- The property value, location and type.
Furthermore, the older the age of the borrower, the higher the monthly payout amount will be. The same goes for the property value – the higher it is, the higher the monthly payout will be.
To get an estimate of the amount of monthly payout, you can make your calculations using the Reverse Mortgage Calculator by Cagamas.
As an example, Ali and his 55-year-old partner own a terrace house in the Klang Valley which is valued at RM500,000.
Interestingly, the borrower can opt for a lump sum payout. However, it is limited to only the following usage:
- Payment for medical expenses
- Settle any outstanding mortgage loan on the property to be charged under the SSB Loan
- Refurbishment and maintenance expenses to upkeep the property.
What Happens Following The Passing Away Of The Borrower?
Following the passing away of a borrower, a loan termination process will take place. Below are the options available to the next-of-kin.
Settle the outstanding SSB Loan
The outstanding amount will depend on the loan tenure. After settling the outstanding amount, the property will be passed back to the next-of-kin.
Not settle the SSB Loan
If the next-of-kin chooses to not settle the loan, Cagamas will proceed to dispose the property and settle the outstanding loan. Any balance in the sale proceeds of the property, after subtracting the loan amount, will be passed on to the borrower’s estate
In The Case Of Both Husband And Wife As Joint-Borrowers, What Would Happen If They Get Divorced?
In this circumstance, the joint borrowers will need to discontinue the SSB Loan by selling the property to settle the outstanding loan amount at that point of time.
Therefore, it is wise to do a risk assessment before you decide to take the loan. Not only will you lose your spouse, but the property will also be sold to pay off the loan.
What About Insurance Coverage For This Loan Scheme?
Just like the requirements for normal mortgage loans by banks, it is compulsory for the homeowner to take fire and home insurance for the property.
Although this seems trivial, it is important because it provides protection especially if something unwanted happens.
Should I Participate In The SSB Reverse Mortgage Scheme?
The answer depends on you because it depends on your own financial situation. Assess your financial situation and ask yourself what you want and what is necessary to be done.
If you take this scheme, you get to go through retirement age more comfortably with the monthly pay-outs. However, after your demise, if there is no immediate family willing to settle the existing outstanding loan, the property will be sold.
If you have no intention to pass on the house to anyone, then enrolling in this scheme is an easy decision to make.
If you don’t want to apply for this scheme because you want to pass this house down to your family, make sure you have also assessed your financial situation. Can you survive on your existing retirement savings? Is it sufficient?
What is important, make the best choice because the situation and circumstances of every individual are different. Only you know what is best. Good luck!
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