Consumption-Portfolio-Housing Choice with Reverse Mortgages

This project aims to study a household’s optimal demand for a reverse mortgage. These contracts allow homeowners to tap their (non-liquid) home equity to finance consumption needs. We study both analytically tractable as well as numerically demanding versions of models that involve the option for agents to enter reverse mortgages. In particular, we want to study what drives the demand for reverse mortgages and how and to which extent unanticipated health shocks and financial disasters alter the decision to enter reverse mortgages.