Payment generosity and the timing of reverse mortgage origination in Korea

This paper studies how predictable variation in monthly payment generosity affects the timing of reverse mortgage origination among eventual borrowers in the Korean Home Pension program. The empirical design exploits a mechanical gap between actual monthly payments and actuarially fair counterfactual payments generated by the interaction between continuous aging and discrete annual payment updates. Households can anticipate future payment changes and choose when to originate. Our estimates capture the responsiveness of observed origination timing to payment generosity among households that ultimately take up the program. The results show that originations are concentrated when the payment schedule is more favorable and decline as the actuarial discount increases, even after accounting for intertemporal substitution around birthdays. These findings provide evidence on timing responses to predictable payment incentives, while leaving the extensive-margin effect of payment changes on population participation for future research.