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A Numerical Analysis to Study Whether the Early Termination of Reverse Mortgages is Rational

Title
A Numerical Analysis to Study Whether the Early Termination of Reverse Mortgages is Rational
Authors
Choi, Hyung-Suk
Ewha Authors
최형석
SCOPUS Author ID
최형석scopus
Issue Date
2019
Journal Title
SUSTAINABILITY
ISSN
2071-1050JCR Link
Citation
SUSTAINABILITY vol. 11, no. 23
Keywords
aging societylongevityreal estate marketreverse mortgagetermination cost
Publisher
MDPI
Indexed
SCIE; SSCI; SCOPUS WOS
Document Type
Article
Abstract
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.
DOI
10.3390/su11236820
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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