| Value of Reverse Mortgage Loan |
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Yoon Kyung Yuh |
| 주택연금의 가치분석 |
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여윤경 |
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| Abstract |
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This paper is to analyze the utility value of the reverse mortgage loan by using AEW (Annuity Equivalent Wealth), which has been used to analyze various life annuities and nation pensions, and AEHC (Annuity Equivalent Housing Cost) which is a new concept introduced to help interpret the results of AEW for this specific type of annuity. We utilize a life-cycle based optimization model in our calculation of the AEW and AEHC. The results indicate that if only the utility from consumption is considered, then retirees are better off with the self-annuitization strategy. The analysis also shows the utility value of the reverse mortgage loan increases as the amount of financial assets increase and the value of house decreases. Also, it seems to be a better strategy for a retiree to delay taking out the reverse mortgage loan unless he has a low amount of financial assets. In the meantime, if we consider the housing cost of retirees during their retirement in addition to the utility from consumption, then the reverse mortgage loan can be an attractive option depending on the level of financial assets, value of house, and expected housing cost of retirees during their retirement. More specifically, if the expected housing cost of retirees during retirement is larger than 30% of their net asset at the time of retirement, then the reverse mortgage loan becomes a better option than the self-annuitization strategy for a significant portion of retirees. These findings have implications for the welfare policy for aging group as well as an individual`s decision making regarding the reverse mortgage loan. |
| Key Words:
기대효용함수,동적 계획법,종신연금,주택연금,최적화,Dynamic Programming,Expected Utility Function,Life Annuity,Optimization,Reverse Mortgage Loan |
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