Reverse Mortgages in Japan

[Tyrell54]

I have a thirty-year housing loan, with still some years remaining, and I would like to convert it to a Reverse Mortgage (I am over sixty). Which bank or financial institution offers the best packages for RM's?

[captainspoke]

I would suggest a lot of caution. Which is " best" is really like choosing which is least worst.

(I tried to write more, but it sounded too much like a screed.)

[Tyrell54]

Thank you - are they really that bad?

[RetireJapan]

My impression is that they are a fairly niche product for people who don't have any other options, so pretty stacked in favour of the issuer.

[Beaglehound]

I would suggest a lot of caution. Which is " best" is really like choosing which is least worst.

(I tried to write more, but it sounded too much like a screed.)

Your ‘screed’ would be useful Captain. With very limited knowledge, I can see that it’s certainly a way for providers to make good money, but then again if you are ageing and short of cash, with no kids to leave stuff to, it seems on the face of it to be a way to release equity while keeping a roof over your head. Is there a downside in that scenario?

[captainspoke]

The issuer undoubtedly low balls the equity they will 'release' to you, certainly less than the property would sell for, or its value now. Or perhaps given your probable years remaining on the property, they'll give you a percentage of what they guess it will sell for 10, 15, or 20 years in the future, when you either move on to a retirement home/assisted living, or die. Note that structures depreciate fairly quickly here, so depending on how old the house is already, add x-number of years, and you may only be looking at the value of the land (however nice/livable you think it may still be).

What about maintaining the property? I'll assume the owner does this (the person receiving the money from the issuer), since it's not a sale. If the structure is eventually still worth something--not a simple write-off--are there any rules or guidelines for what its condition should be? Eg, knowing your time to move out is coming, there'd be little incentive to fix/repair/replace anything. The issuer will be factoring this in, presuming that the structure will go downhill--that it would not be maintained as it would be if there was no reverse mortgage and the seller would be putting it on the market.

If the assessment is that the structure will be valueless and rebuilding is what will happen, what will it take to rebuild on the property? Zoning rules and building codes have changed a lot, so it may not be possible to rebuild on the lot--things like setbacks, slopes, retaining walls, relative level (elevation) of your lot and others around it, maybe how deep a new foundation would have to be, and so on. Wrap all that together and the value of the land may be less than you think it is. (Our plot is like this, about 75 tsubo but to rebuild on it would be prohibitive--so a poor candidate for a reverse mortgage.) And that's for land/house, the value of a condo ticks down pretty steadily as the years go by.