Reverse mortgage loans: a quantitative analysis

Makoto Nakajima () and Irina Telyukova ()

No 14-27, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Supersedes Working Paper 13-27. Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. Despite growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, the authors analyze reverse mortgages in a calibrated life-cycle model of retirement. The average welfare gain from RMLs is $885 per homeowner. The authors? model implies that low-income, low-wealth, and poor-health households benefit the most, consistent with empirical evidence. Bequest motives, nursing-home-move risk, house price risk, and loan costs all contribute to the low take-up. The Great Recession may lead to increased RML demand, by up to 30% for the lowest-income and oldest households.

Keywords: reverse mortgages; Mortgage; Housing; Retirement; Home Equity Conversion Mortgage; HECM (search for similar items in EconPapers)
JEL-codes: D91 E21 G21 J14 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014-09-08
New Economics Papers: this item is included in nep-age, nep-ban, nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Reverse Mortgage Loans: A Quantitative Analysis (2017)
Working Paper: Reverse mortgage loans: a quantitative analysis (2013)
Working Paper: Reverse Mortgage Loans: A Quantitative Analysis (2011)
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