Mizuho Bank began offering reverse mortgages Monday, allowing elderly people with limited incomes to access lines of credit based on the value of their land to meet financial needs.
Mizuho is the first mega-bank to handle reverse mortgages. Sumitomo Mitsui Trust Bank and Tokyo Star Bank are among lenders already providing similar services.
In reverse mortgages, homeowners receive loans by putting their residential land up as collateral in many cases.
The borrowers are not required to pay back the loans during their lifetime and the debt is repaid by selling the collateral after death.
Mizuho will provide reverse mortgages to customers 55 or older who own houses on land assessed at ¥40 million or more who have fully repaid their housing loans.
Their reverse mortgage proceeds can be used for living expenses, home repairs, deposits for elderly care facilities, and medical and nursing care costs, among other purposes.
After starting in Tokyo, Mizuho plans to provide the loans in Kanagawa, Chiba and Saitama prefectures starting Oct. 1. It is considering offering the tool in Osaka, Kyoto, Hyogo and Aichi prefectures in the future, bank officials said.
Mizuho estimates potential demand from about 230,000 customers in Tokyo and the seven prefectures above to come to about ¥5 trillion, the officials said.
During the contract period, a Mizuho representative will visit a borrower at least once a year to check on his living conditions and loan collateral value.
After the borrowers die, Mizuho Trust & Banking Co. will take care of the inheritance and disposal of the collateral land.
Asahi Shinkin Bank, a Tokyo-based “shinkin” (credit association) that serves Tokyo, Saitama and Chiba, hopes to offer reverse mortgages. Other regional lenders may follow suit.