Unlocking Housing Equity Through Reverse Mortgages: The Case of Elderly Homeowners in Australia

Abstract This paper investigates the extent to which reverse mortgages can improve the economic well-being of elderly Australian homeowners. Reverse mortgages are designed to enable elderly homeowners to unlock illiquid wealth tied up in their housing equity to generate income. The elderly borrow against the value of their homes. However, no repayments are made until the house is sold or the elderly borrower dies. The findings from this paper indicate that the scope for reverse mortgages to improve economic well-being is considerable in Australia. Elderly homeowners who are likely to receive the largest gains from reverse mortgages are very elderly, single, female and have significant housing equity. However, in areas with slow house price appreciation rates elderly homeowners who enter into reverse mortgages face the risk of being left with little housing equity to draw on when needed or to bequeath to their beneficiaries when they pass away.

[1]  Joel Waldfogel,et al.  Introduction , 2010, Inf. Econ. Policy.

[2]  Christopher Giles,et al.  TAXBEN: the IFS microsimulation tax and benefit model , 1995 .

[3]  Dennis Trewin,et al.  Year book Australia , 1979 .

[4]  M. Hurd.  Research on the Elderly: Economic Status, Retirement, and Consumption and Saving , 1990 .

[5]  D. Beal.  HOME EQUITY CONVERSION IN AUSTRALIA — ISSUES, IMPEDIMENTS AND POSSIBLE SOLUTIONS , 2001 .

[6]  Nandinee K. Kutty,et al.  Potential Beneficiaries from Reverse Mortgage Products for Elderly Homeowners: An Analysis of American Housing Survey Data , 1994 .

[7]  Karen M. Gibler,et al.  The Case for Reverse Mortgages in Australia - Applying the USA Experience , 2003 .

[8]  R. Ong,et al.  Welfare to Work in Australia: Disability Income Support, Housing Affordability and Employment Incentives , 2007 .

[9]  Nandinee K. Kutty,et al.  Demographic Profiles of Elderly Homeowners in Poverty Who Can Gain from Reverse Mortgages , 1999 .

[10]  G. Wood,et al.  Low Income Housing Tax Credit Programme Impacts on Housing Affordability in Australia: Microsimulation Model Estimates , 2006 .

[11]  K. Rowlingson.  ‘Living Poor to Die Rich’? Or ‘Spending the Kids' Inheritance’? Attitudes to Assets and Inheritance in Later Life , 2006, Journal of Social Policy.

[12]  C. Mayer,et al.  A new look at reverse mortgages: potential market and institutional constraints , 1994 .

[13]  Ruth M Hancock.  Can housing wealth alleviate poverty among Britain's older population? , 1998 .

[14]  Nandinee K. Kutty,et al.  The Scope for Poverty Alleviation among Elderly Home-owners in the United States through Reverse Mortgages , 1998 .

[15]  Emiliano A. Valdez,et al.  LONGEVITY INSURANCE: A MISSING MARKET , 2005 .

[16]  John C. Sawhill,et al.  The Finance and Analysis of Capital Projects. , 1965 .

[17]  D. Wise,et al.  Aging and the Income Value of Housing Wealth , 1990 .

[18]  I F Megbolugbe,et al.  Reverse mortgages and the economic status of elderly women. , 1996, The Gerontologist.

[19]  C. Mayer,et al.  Reverse Mortgages and the Liquidity of Housing Wealth , 1994 .

[20]  B. Case,et al.  Preliminary Evaluation of the Hecm Reverse Mortgage Program , 1994 .