Reverse mortgage loans: a quantitative analysis

Makoto Nakajima () and Irina Telyukova ()

No 13-27, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. In spite of growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, we analyze reverse mortgages in a life-cycle model of retirement, calibrated to age-asset profiles. The ex-ante welfare gain from RMLs is sizable at $1,000 per household; ex-post, low-income, low-wealth and poor-health households use them. Bequest motives, nursing-home moving risk, house price risk, and interest and insurance costs all contribute to the low take-up rate. The model predicts market potential for RMLs to be 5.5% of households.

Keywords: Mortgages; Mortgage loans, Reverse; Housing; Retirement; Home equity loans (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-age, nep-ban, nep-dem, nep-dge and nep-ure
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Reverse Mortgage Loans: A Quantitative Analysis (2017)
Working Paper: Reverse mortgage loans: a quantitative analysis (2014)
Working Paper: Reverse Mortgage Loans: A Quantitative Analysis (2011)
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