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Reverse Mortgages and Financial Literacy

Author

Listed:
  • Ismael Choinière-Crèvecoeur
  • Pierre-Carl Michaud
Abstract
Few retirees use reverse mortgages. In this paper, we investigate how financial literacy and prior knowledge of the product influence take-up by conducting a stated-preference experiment. We exogenously manipulate characteristics of reverse mortgages to tease out how consumers value them and investigate differences by financial literacy and prior knowledge of reverse mortgages. We find that those with higher financial knowledge are more likely to know about reverse mortgages, not more likely to purchase them at any cost but are more sensitive to the interest rate and the insurance value of these products in terms of the non-negative equity guarantee. Peu de retraités ont recours aux prêts hypothécaires inversés. Dans cet article, nous étudions l'influence de la littératie financière et de la connaissance préalable du produit sur son utilisation en menant une expérience de préférences déclarées. Nous manipulons de manière exogène les caractéristiques des prêts hypothécaires inversés afin de déterminer la valeur que leur accordent les consommateurs et d'étudier les différences en fonction de la littératie financière et de la connaissance préalable des prêts hypothécaires inversés. Nous constatons que les personnes ayant de meilleures connaissances financières sont plus susceptibles de connaître les prêts hypothécaires inversés; qu'elles ne sont pas plus susceptibles de les acheter à tout prix; mais qu'elles sont plus sensibles au taux d'intérêt et à la valeur d'assurance de ces produits en termes de garantie de valeur nette réelle non négative.

Suggested Citation

  • Ismael Choinière-Crèvecoeur & Pierre-Carl Michaud, 2023. "Reverse Mortgages and Financial Literacy," CIRANO Working Papers 2023s-06, CIRANO.
    • Handle: RePEc:cir:cirwor:2023s-06
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    References listed on IDEAS

    as
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    Cited by:

    1. Pierre-Carl Michaud & Pascal St-Amour, 2023. "Longevity, Health and Housing Risks Management in Retirement," Swiss Finance Institute Research Paper Series 23-18, Swiss Finance Institute.
    2. Sara Lamboglia & Noemi Oggero & Mariacristina Rossi & Massimiliano Stacchini, 2024. "Financial knowledge and career aspirations among the young: a route to entrepreneurship," Questioni di Economia e Finanza (Occasional Papers) 838, Bank of Italy, Economic Research and International Relations Area.
    3. LoRiggio, Tessa & Morris, Todd, 2024. "The Gender Wealth Gap near Retirement in Canada," IZA Policy Papers 207, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    reverse mortgages; savings; retirement planning; insurance; hypothèques inversées; épargne; planification de la retraite; assurance;
    All these keywords.

    JEL classification:

    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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