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

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  • Rachel Ong

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.

Suggested Citation

  • Rachel Ong, 2008. "Unlocking Housing Equity Through Reverse Mortgages: The Case of Elderly Homeowners in Australia," European Journal of Housing Policy, Taylor and Francis Journals, vol. 8(1), pages 61-79.
    • Handle: RePEc:taf:eurjhp:v:8:y:2008:i:1:p:61-79
    DOI: 10.1080/14616710701817166
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    Cited by:

    1. Dillingh, Rik & Prast, Henriette & Rossi, Mariacristina & Urzì Brancati, Cesira, 2017. "Who wants to have their home and eat it too? Interest in reverse mortgages in the Netherlands," Journal of Housing Economics, Elsevier, vol. 38(C), pages 25-37.
    2. Ruiz, José Luis & Tapia, Pablo & Donoso, José, 2019. "The social and economic effects of introducing reverse mortgages in Chile," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    3. Carole Bonnet & Sandrine Juin & Anne Laferrère, 2019. "Private Financing of Long‑Term Care: Income, Savings and Reverse Mortgages," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 507-508, pages 5-24.
    4. Kyung Jin Choi & Byungkwon Lim & Jaehwan Park, 2020. "Evaluation of the Reverse Mortgage Option in Korea: A Long Straddle Perspective," IJFS, MDPI, vol. 8(3), pages 1-14, September.
    5. Yang, Jaehwan & Yuh, Yoonkyung, 2019. "Reverse Mortgages for Managing Longevity Risk in Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 21-40, June.
    6. Dillingh, Rik, 2016. "Empirical essays on behavioral economics and lifecycle decisions," Other publications TiSEM 0e2143e3-bd86-4302-90eb-e, Tilburg University, School of Economics and Management.
    7. Wei Han & Ping Wang & Hao Xu & June-Sung Choi, 2017. "Evaluation of the Reverse Mortgage Option in Hong Kong," Asian Economic Journal, East Asian Economic Association, vol. 31(2), pages 187-210, June.
    8. Mohammed Mohammed Ishaq & Sulaiman Noralfishah, 2018. "Determinants of Reverse Mortgage Usage in Malaysia," Real Estate Management and Valuation, Sciendo, vol. 26(3), pages 5-23, September.

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