Asset-rich and cash-poor: which older adults value reverse mortgages?

Abstract

Home equity represents a substantial share of retirement wealth for many older persons, particularly in Asia where national housing policies have encouraged home-ownership. This paper explored the potential for reverse mortgages to help ‘asset-rich and cash-poor’ older Singaporeans unlock their home equity while ageing in place. The empirical analysis was based on a nationally representative survey of home-owners age 50+ in the 2018 Singapore Life Panel (N = 6,258). Our analyses showed that the average older home-owner holds some 60 per cent of total net wealth in housing equity, suggestive of high demand potential for reverse mortgage products. Nevertheless, actual interest in such products was much below potential demand. Only one in four older home-owners indicated interest in commercial reverse mortgages if these were to become available; a larger majority had never heard of the financial product. Interest in reverse mortgages was positively associated with product awareness and self-rated product understanding. This implies that a critical step towards building consumer interest would be to enhance awareness of such products and simplify related contract terms. Having a mortgage, fewer children, financial literacy and preparedness for retirement were also positively associated with interest level. These results have implications for targeted interventions to enhance consumer awareness and spur interest in reverse mortgages, especially in ageing societies where older people have built up substantial equity through the housing market over time.

Income‐poor, asset‐rich? The role of homeownership in shaping the welfare position of the elderly

“…The problem, however, is more complex as many older people are not aware of such options to increase their income. As Fong et al (2021) showed for Singapore, although an average older homeowner's wealth consists of housing equity in 60%, only 25% of older homeowners reports an interest in a commercial reverse mortgage. This means that the potential of a reversed mortgage is not used to increase retirement income.…”

Is there a trade‐off between housing and pension system generosity? Empirical evidence from the Luxembourg Wealth Study

“…Recent empirical works show that housing wealth gains in importance as a source of additional retirement income, including implicit rent, and it can be a relevant pillar supporting pension adequacy (Hu et al, 2020; Jaiyawala et al, 2022). On the other hand, some authors notice the unawareness of the older population in terms of the options to release the home equity in order to gain additional retirement income (Fong et al, 2021; Kim et al, 2021). That is why the use of housing wealth has an unexplored potential to reduce poverty among the elderly and support their consumption.…”

Reverse Mortgages: A Bibliometric Approach

“…The reverse mortgages program allows older homeowners to unlock and consume a portion of their home equity without leaving their properties (Boj et al, 2022;Fong et al, 2020). With reverse mortgages, the older homeowners may borrow from the lenders using their properties as collateral.…”