(C) The Scan Foundation

SEOUL — The traditional Korean sentiment of passing down the family home to one’s children is rapidly giving way to a more pragmatic approach to retirement. As the nation grapples with a rapidly aging population and rising living costs, the South Korean government has announced a significant overhaul of the Housing Pension (Reverse Mortgage) system, aimed at putting more monthly cash into the pockets of senior citizens.

According to the Financial Services Commission (FSC) on Tuesday, the "2026 Housing Pension Improvement Plan" will take effect starting March 1. The reform focuses on three pillars: increasing monthly payouts, lowering entry barriers, and expanding eligibility for vulnerable groups.

More Cash, Less Burden
The most immediate change for seniors is the increase in monthly stipends. For an average participant—defined as a 72-year-old owning a home valued at 400 million KRW (approx. $300,000)—monthly payments will rise from 1.29 million KRW to 1.33 million KRW. While a 3% increase might seem modest, it adds up to an additional 8.49 million KRW in total liquidity over the average lifespan of the pension.

Furthermore, the government is slashing the "Initial Guarantee Fee." Previously set at 1.5% of the house price, this upfront cost will drop to 1.0% starting next month. To ensure these lower initial fees don't result in smaller monthly checks, the annual guarantee fee will be slightly adjusted from 0.75% to 0.95% of the remaining loan balance.

Strengthening the Safety Net for Low-Income Seniors
The FSC is also sharpening its focus on "vulnerable seniors"—those living in lower-valued homes who rely heavily on state support. Starting June 1, homeowners with properties valued under 180 million KRW will see an expansion in preferential payment rates.

For instance, a 77-year-old homeowner with a property valued at 130 million KRW will see their monthly "preferential bonus" jump from 93,000 KRW to 124,000 KRW. Currently, this "Preferred Housing Pension" is available to couples where at least one person receives a basic senior pension and the combined assets are limited to a single home worth less than 250 million KRW.

Flexibility: Addressing the Realities of Aging
Perhaps the most significant shift is the loosening of the "Primary Residence" requirement. Historically, many seniors were disqualified from the program if they had to move into nursing homes or live with their children for health reasons.

Beginning in June, the FSC will allow exceptions for:

Medical Treatment: Seniors moving to hospitals or long-term care facilities.
Family Care: Moving in with children for physical support.
Rental Opportunities: With approval from the Korea Housing Finance Corporation (HF), homeowners may even lease their property to a third party while still receiving pension payments.
In a move to ensure long-term family stability, the government is also introducing a "Succession Clause." If a parent passes away, a child aged 55 or older who inherits the home can now transition into their own Housing Pension without the immediate burden of repaying the parent's outstanding debt.

A Shift in Social Paradigm
As of the end of 2025, approximately 150,000 households were enrolled in the Housing Pension. While this represents only a 2% participation rate among eligible homeowners, the FSC expects this to climb to 3% by 2030.

"The mindset is shifting," says a local financial analyst. "Seniors are realizing that using their home as an ATM for their sunset years is more beneficial than leaving a piece of real estate to children who are often already established. It’s about dignity in retirement."

With these improvements, the South Korean government hopes to transform the home from a dormant asset into a vital tool for social welfare, ensuring that the "Golden Years" are actually golden.