A Numerical Analysis to Study Whether the Early Termination of Reverse Mortgages is Rational
- 주제(키워드) aging society , longevity , real estate market , reverse mortgage , termination cost
- 주제(기타) Green & Sustainable Science & Technology; Environmental Sciences; Environmental Studies
- 설명문(일반) [Choi, Hyung-Suk] Ewha Womans Univ, Sch Business, Ewhayeodae Gil 52, Seoul 03760, South Korea
- 등재 SCIE, SSCI, SCOPUS
- OA유형 gold, Green Published
- 발행기관 MDPI
- 발행년도 2019
- 총서유형 Journal
- URI http://www.dcollection.net/handler/ewha/000000165810
- 본문언어 영어
- Published As http://dx.doi.org/10.3390/su11236820
초록/요약
A reverse mortgage supports the aging society more sustainably by providing stable cash flows to elderly retirees. Although the reverse mortgage market has successfully grown in many developed countries, we have observed significantly increased early terminations due to the recent housing market boom in Korea. In this study, we provide the numerical solutions for the monthly payment from the actuarial pricing model of the reverse mortgage, reflecting the house price growth and mortality improvement to examine whether the early-termination-and-repurchase strategy is profitable. Findings suggest that in order for the strategy to be profitable, the realized growth rate of the house price should be significantly greater than the expected growth rate in the actuarial pricing model. Furthermore, for the older borrower, the greater growth rate of the house price is required for the strategy to be profitable.
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