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Evaluation of Reverse Mortgage Programs in Korea

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Authors

Ma, Seungryul; Deng, Yongheng

Issue Date
2013-06
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business, Vol.19 No.1, pp. 137-160
Keywords
Insurance premium structureReverse mortgageConstant monthly paymentsGraduate monthly paymentsTotal annual loan costs rates
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.
ISSN
1226-9816
Language
English
URI
https://hdl.handle.net/10371/83791
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of Business (SJB)Seoul Journal of Business Volume 19, Number 1/2 (2013)
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