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Evaluation of reverse mortgage programs in Korea

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  • Evaluation of reverse mortgage programs in Korea
  • Ma, Seungryul; Deng, Yongheng
  • Seoul National University


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Title Evaluation of reverse mortgage programs in Korea
Similar Titles
Material Type Articles
Author(English)

Ma, Seungryul; Deng, Yongheng

Publisher

[Seoul, S.Korea]:Seoul National University

Date 2013-06
Journal Title; Vol./Issue Seoul Journal of Business:vol. 19(no. 1)
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Administration
Industry and Technology < Others
Holding Seoul National University

Abstract

We analyze an actuarial model of reverse mortgage programs in Korea. Our analyses provide a comparison between the reverse mortgage loans structured with constant monthly payments and those that make graduate monthly payments which are indexed to the growth rate of consumer prices. Using the total annual loan cost measure, we find that the graduate monthly payments approach is more efficient than the constant monthly payments approach. Our analyses also confirms that younger age cohorts are more sensitive to changes in their loan terms. We propose therefore that the terms of reverse mortgage programs should be structured more conservatively for the relatively younger borrower groups. The results provide useful information to reverse mortgage borrowers considering the various payment options, and pertinent guidelines for the future operation of reverse mortgage systems in Korea and elsewhere.