When should retirees tap their home equity?
- This paper studies a household’s optimal demand for a reverse mortgage. These contracts allow homeowners to tap their home equity to finance consumption needs. In stylized frameworks, we show that the decision to enter a reverse mortgage is mainly driven by the dierential between the aggregate appreciation of the house price and principal limiting factor on the one hand and the funding costs of a household on the other hand. We also study a rich life-cycle model that can explain the low demand for reverse mortgages as observed in US data. In this model, we analyze the optimal response of a household that is confronted with a health shock or financial disaster. If an agent suers from an unexpected health shock, she reduces the risky portfolio share and is more likely to enter a reverse mortgage. On the other hand, if there is a large drop in the stock market, she keeps the risky portfolio share almost constant by buying additional shares of stock. Besides, the probability to take out a reverse mortgage is hardly aected.
Verfasserangaben: | Christoph Hambel, Holger KraftGND, André Meyer-Wehmann |
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URN: | urn:nbn:de:hebis:30:3-555665 |
DOI: | https://doi.org/10.2139/ssrn.3720645 |
Titel des übergeordneten Werkes (Englisch): | SAFE working paper series ; No. 293 |
Schriftenreihe (Bandnummer): | SAFE working paper (293) |
Verlag: | SAFE |
Verlagsort: | Frankfurt am Main |
Dokumentart: | Arbeitspapier |
Sprache: | Englisch |
Jahr der Fertigstellung: | 2020 |
Jahr der Erstveröffentlichung: | 2020 |
Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Datum der Freischaltung: | 03.11.2020 |
Freies Schlagwort / Tag: | biometric risks; consumption-portfolio decisions; financial disasters; optimal stopping; reverse mortgage |
Ausgabe / Heft: | Current version: August 27, 2020 |
Seitenzahl: | 52 |
HeBIS-PPN: | 473256282 |
Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Lizenz (Deutsch): | Deutsches Urheberrecht |