Cagamas Reverse Mortgage: A Good Retirement Solution?

Everyone knows that Malaysia is facing a retirement crisis – not many people have saved up enough to fund their old age. Announced in late 2021/early 2022, Cagamas, the National Mortgage Corporation of Malaysia introduced the Skim Saraan Bercagar (SSB) or Cagamas Reverse Mortgage.

It is hoped to be (one of) the solutions to this crisis.

The idea is, instead of you being forced to sell your house in old age to fund retirement, Cagamas pays YOU a monthly payout until your demise. When this happens, Cagamas will then get ownership of the property, which then will be sold (for profit, hopefully).

Because of the way it works, in effect the house cannot be given as inheritance to the next-of-kin (because Cagamas now owns the property). However, the next-of-kin will receive profit from sales proceeds of the property, if any.

On the other hand, shortfall will be absorbed by Cagamas (good, no debt or payment required for your next-of-kin).

Basically, this is how Standard Mortgage differs from Cagamas Reverse Mortgage

Standard mortgage	Cagamas Reverse Mortgage
– Pay monthly mortgage to bank, own property in 30-35 years – Can be given as inheritance	– Cagamas gives monthly payout until the end of your life – Cannot be given as inheritance

Before you get too excited, just know that the monthly payout amount is good, but not bombastic because it is spread over a long period of time. Many of us forget that ‘retirement age’ is a hella long time – 20 years or more. Also, how much monthly payout you get depends on a few factors.

How much do you get from Cagamas Reverse Mortgage?

How much you will get for your house from Cagamas Reverse Mortgage depends on:

• (1) the borrower’s age, and
• (2) property value, location and type.

You can get an estimate with Cagamas’ Reverse Mortgage Calculator.

I made an example calculation. In this case, a 60 years old couple with RM800,000 house in Petaling, Klang and Hulu Langat district can expect to get RM1053 in monthly payment per month, for life.

I thought it was good that there’s also an option to take RM38.5k upfront lumpsum too. If the couple takes that option, the monthly payment drops to RM842.03.

If you thought – that’s it? Just RM800-RM1k for a RM800k house? Well, they did say Cagamas Reverse Mortgage is for supplemental income, didn’t they?

Also, bear in mind that 60 years old is relatively young, thus the lower amount. I played around with the calculator and assuming all variables are the same except for the age, one would get:

• RM1385 monthly lifetime payout and RM47.2k in maximum lumpsum at age 65
• RM1851 monthly lifetime payout and RM57.1k in maximum lumpsum at age 70
• RM2486 monthly lifetime payout and RM67.3k in maximum lumpsum at age 75
• And so on

One question I do ask is – how will the house appraisal be conducted? Obviously it’s best to have a high appraisal on your house value so you’d get maximum amount.

If I were interested in Cagamas Reverse Mortgage, I would probably try my best to do strategic home enhancements to increase my property value as much as possible 🙂

Eligibility for Cagamas Reverse Mortgage

All this looks good, but not everyone is eligible for Cagamas Reverse Mortgage. Here are the criteria for borrower and for property.

(All taken from Cagamas Reverse Mortgage website)

Criteria for 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 age limit

Criteria for Property

• Residential property in Malaysia held in 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 mortgage and other financial liabilities.

In short, you must fully own the home and also live there. Cagamas Reverse Mortgage is not applicable for investment property, or weekend homes. Although having said that, I’m sure you can have a chat with them when you apply and see if that’s a hard rule. One never knows.

Speaking of how to apply,

How to Apply for Cagamas Reverse Mortgage

(All taken from Cagamas Reverse Mortgage website)

Step 1

Schedule an appointment with EPF at any of the branches below via this link: https://www.kwsp.gov.my/ms/janjitemu

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 are 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).

Suraya’s note: Great idea! Extra income in old age is obviously welcomed, but no matter how much you get, it wouldn’t be enough if one doesn’t manage their finances optimally.

Step 4

Complete the reverse mortgage financial advisory module with AKPK at the nearest AKPK Branch.

Suraya’s note: Quite impressed they designed a module just for this scheme.

Step 5

Once completed, you can submit your SSB application for the Skim Saraan Bercagar Loan to Cagamas. Make sure to attach AKPK’s confirmation of attendance form and other relevant supporting documents together with your application.

Final thoughts on Cagamas Reverse Mortgage

According to Belanjawanku 2021, a senior single spends between RM1,990 and RM2,490, while a senior couple spends between RM2,590-RM3,170 per month, depending on where they live.

Therefore, even if one takes the Cagamas Reverse Mortgage, one is expected to cover the shortfall with other savings or income. It’s not a silver bullet.

Cagamas Reverse Mortgage is meant to be a supplemental income stream, and not the only income stream. Therefore, if one is eligible, one should combine this strategy with other efforts, like:

• Increase income and decrease expenses
• Allocate more money to retirement earmarked accounts like EPF and PRS
• Use retirement calculator to calculate shortfall
• Hire a financial planner

That’s all from me. Do check out the website at https://ssb.cagamas.com.my/ and watch the video below to learn more. Share this article with your parents and see if this is a good option for them.