Innovative Finanzdienstleistungen

Reifner, Udo; Tiffe, Achim

doi:10.5771/9783845202297

Cited by 18 publications

(10 citation statements)

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“…Markets for equity release products for retirees exist in numerous countries including the United States, the United Kingdom, Australia, Canada, New Zealand, and several countries in the European Union. The two main forms of equity release are reverse mortgage schemes (“loan model”) and home reversion schemes (“sale model”) (see, e.g., Hosty et al, ; Reifner et al, ). Reflecting those market conditions, we model a retiree's choice between a reverse mortgage and a home reversion plan.…”

Section: Introductionmentioning

confidence: 99%

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Portfolio Choice in Retirement—What is The Optimal Home Equity Release Product?

Hanewald

Post²,

Sherris

2015

J of Risk & Insurance

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We study the decision problem of the optimal choice between home equity release products from a retired homeowner's perspective in the presence of longevity, long-term care, house price, and interest rate risk. The individual can choose to release home equity using reverse mortgages or home reversion plans, to buy annuities, and long-term care insurance. The individual enjoys utility gains from having access to either one of the two equity release products. Higher utility gains are found for the reverse mortgage, as its product features allow for higher lump-sum payouts and provide downside protection for house prices.

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Section: Introductionmentioning

confidence: 99%

“…Home reversion has existed for a long time in the form of private arrangements, for example, in France, Portugal, and Poland (Reifner et al, ). Commercial home reversion is available, for example, in Australia, France, Finland, New Zealand, and the United Kingdom.…”

Section: Introductionmentioning

confidence: 99%

Portfolio Choice in Retirement—What is The Optimal Home Equity Release Product?

Hanewald

Post²,

Sherris

2015

J of Risk & Insurance

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“… 3 According to Reifner et al , (2009), a Study on Equity Release Schemes in the EU, commissioned by the EU and carried out by the Institut für Finanzdienstleistungen (IFF) in 2007 (available at ), approximately 45,000 lifetime/reverse mortgages contracts were signed in the EU in 2007, for an estimated value of €3.3 billion, less than 0.1% of the overall mortgage market.…”

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confidence: 99%

Explaining why, right or wrong, (Italian) households do not like reverse mortgages

Fornero¹,

Rossi²,

Brancati³

2015

Journal of Pension Economics and Finance

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According to economic theory, elderly homeowners should be much more eager than they actually are to adopt financial instruments allowing them to borrow against home equity. This paper investigates the determinants of interest in one such instrument: the reverse mortgage. Our focus is the Italian market and we draw from a unique dataset, UniCredit's 2007 survey on household savings to perform our empirical analysis. Out of over 1,200 respondents, roughly 60% claimed to have no interest in the product, while the remaining 40% expressed various degrees of appeal, from quite low to very high. Risk/uncertainty related elements are strongly correlated with interest in the product. Willingness to sell one's home (as a means to increase future income) and uncertainty about post-retirement standard of living are significant predictors of high interest in the product, while an aversion to take on debt and a larger housing equity predict a lack of interest. This results suggest that reverse mortgages are not perceived as instruments to accomplish a better standard of living in old age, but rather as a last resort choice in case of necessity.

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“…The loan is secured using a mortgage on the property. Reverse mortgage contract stipulates that repayment is made from the proceeds of the sale of the property either after the death of the homeowner or when the property has become vacated for a longer time (see details on European implementations in Reifner et al , 2009).…”

Section: Modelmentioning

confidence: 99%

Housing equity withdrawal for development of assisted-living facilities

Bogataj

Rogelj²,

Bogataj

et al. 2020

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Purpose The purpose of this study is to develop new type of reverse mortgage contract. How to provide adequate services and housing for an increasing number of people that are dependent on the help of others is a crucial question in the European Union (EU). The housing stock in Europe is not fit to support a shift from institutional care to the home-based independent living. Some 90% of houses in the UK and 70%–80% in Germany are not adequately built, as they contain accessibility barriers for people with emerging functional impairments. The available reverse mortgage contracts do not allow for relocation to their own adapted facilities. How to finance the adaptation from housing equity is discussed. Design/methodology/approach The authors have extended the existing loan reverse mortgage model. Actuarial methods based on the equivalence of the actuarial present values and the multiple decrement approach are used to evaluate premiums for flexible longevity and lifetime long-term care (LTC) insurance for financing adequate facilities. Findings The adequate, age-friendly housing provision that is appropriate to support the independence and autonomy of seniors with declining functional capacities can lower the cost of health care and improve the well-being of older adults. For financing the development of this kind of facilities for seniors, the authors developed the reverse mortgage scheme with embedded longevity and LTC insurance as a possible financial instrument for better LTC services and housing with care in assisted-living facilities. This kind of facilities should be available for the rapid growth of older cohorts. Research limitations/implications The numerical example is based on rather crude numbers, because of lack of data, as the developed reverse mortgage product with LTC insurance is a novelty. Intensity of care and probabilities of care in certain category of care will change after the introduction of this product. Practical implications The model results indicate that it is possible to successfully tie an insurance product to the insured and not to the object. Social implications The introduction of this insurance option will allow many older adult with low pension benefits and a substantial home equity to safely opt for a reverse mortgage and benefit from better social care. Originality/value While currently available reverse mortgage contracts lapse when the homeowner moves to assisted-living facilities in any EU Member State, in the paper a new method is developed where multiple adjustments of housing to the functional capacities with relocation is possible, under the same insurance and reverse mortgage contract. The case of Slovenia is presented as a numerical example. These insurance products, as a novelty, are portable, so the homeowner can move in own specialised housing unit in assisted-living facilities and keep the existing reverse mortgage contract with no additional costs, which is not possible in the current insurance products. With some small modifications, the method is useful for any EU Member State.

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Innovative Finanzdienstleistungen

Cited by 18 publications

References 0 publications

Portfolio Choice in Retirement—What is The Optimal Home Equity Release Product?

Portfolio Choice in Retirement—What is The Optimal Home Equity Release Product?

Explaining why, right or wrong, (Italian) households do not like reverse mortgages

Housing equity withdrawal for development of assisted-living facilities

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