The Relationship Between Reverse Mortgage Borrowing, Domain and Life Satisfaction.

Abstract

Reverse mortgages allow adults aged 62 years and older to borrow against the equity in their homes without incurring monthly loan repayments. This study examines the relationship of reverse mortgage borrowing with older adults' satisfaction with their financial situation, housing, health, and daily life/leisure as well as with life as a whole. A new national data set of 1,088 older adults, comprised of loan data, credit histories, and responses to a phone survey, was created. Our estimation strategy compares reverse mortgage borrowers to older adults who obtained mandatory counseling but not a reverse mortgage. Reverse mortgage borrowers have significantly higher financial and housing satisfaction compared to nonborrowers; no differences were found for health, daily life/leisure, and general satisfaction. These satisfaction domains contribute differently to general satisfaction for reverse mortgage borrowers relative to nonborrowers: housing satisfaction has a greater influence for borrowers and health a greater influence for nonborrowers. Our study provides new knowledge about the longer-term outcomes of reverse mortgage borrowers. The positive association of reverse mortgage borrowing for housing and financial satisfaction and, in turn, general satisfaction, provides insights regarding borrower experiences with this controversial financial tool.