Portfolio Choice in Retirement: What is The Optimal Home Equity Release Product?

Katja Hanewald; Thomas Post; Michael Sherris

doi:10.1111/jori.12068

Portfolio Choice in Retirement: What is The Optimal Home Equity Release Product?

Katja Hanewald^*, Thomas Post, Michael Sherris

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We study the decision problem of the optimal choice between home equity release products from a retired homeowner's perspective in the presence of longevity, long-term care, house price, and interest rate risk. The individual can choose to release home equity using reverse mortgages or home reversion plans, to buy annuities, and long-term care insurance. The individual enjoys utility gains from having access to either one of the two equity release products. Higher utility gains are found for the reverse mortgage, as its product features allow for higher lump-sum payouts and provide downside protection for house prices.

Original language	English
Pages (from-to)	421-446
Number of pages	26
Journal	Journal of Risk and Insurance
Volume	83
Issue number	2
DOIs	https://doi.org/10.1111/jori.12068
Publication status	Published - Jun 2016

Keywords

CONSUMPTION

Access to Document

10.1111/jori.12068

Cite this

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abstract = "We study the decision problem of the optimal choice between home equity release products from a retired homeowner's perspective in the presence of longevity, long-term care, house price, and interest rate risk. The individual can choose to release home equity using reverse mortgages or home reversion plans, to buy annuities, and long-term care insurance. The individual enjoys utility gains from having access to either one of the two equity release products. Higher utility gains are found for the reverse mortgage, as its product features allow for higher lump-sum payouts and provide downside protection for house prices.",

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