The Economist’s Corner: Factors That Affect the Propensity to Obtain a Reverse Mortgage

The Economist’s Corner: Factors That Affect the Propensity to Obtain a Reverse Mortgage

By Dr. Edward Seiler, vice president, Economics and Research, Dworbell, Inc.

At last week’s Eastern Regional Meeting, I highlighted results from recent empirical studies that corroborate earlier findings: HECM counseled households have lower incomes and more modest non-housing wealth than comparable nonborrower age 62+ homeowners, and reverse mortgage borrowers are more likely to be non-married and to have a college level education. 

While these findings may not be novel to many reverse mortgage professionals, University of Georgia Professor Swarn Chatterjee (International Journal of Financial Studies, 2016) examines Health and Retirement Study (HRS) data to quantify some original and interesting nuggets on reverse mortgage borrowers:

  • Homeowners with reverse mortgages have better self-reported health statuses; 
  • HRS respondents with two or more activities of daily living (ADL) problems are 70 percent less likely to have a reverse mortgage, and respondents with private long-term care insurance are 67 percent less likely;
  • Homeowners who report themselves as being risk averse are 44 percent more likely to have a reverse mortgage than those who do not; and 
  • Reverse mortgage borrowers are more likely to have prepared a 5+ year financial plan and are more likely to report a higher probability of leaving a bequest.

By examining many factors, we can identify households with higher propensities to obtain reverse mortgages. We can then tailor products and services for these potential borrowers to grow the market.