Perspectives about Reverse Mortgage in Italy: a life-cycle model and quantitative evidences

n the urgency of providing adequate solutions for ”house rich and cash poor” retirees, home equity release products may constitute a valid support. Despite its availability in Italy, the Reverse Mortgage remains a relatively underutilized financial instrument. This product allows elder homeowners to borrow money using their home as security for the loan maintaining the right to live in the house. Upon the borrower’s death, heirs must repay the debt and the non-negative equity guarantee ensures that the exceed of the proceeds of the sale of the property is intended for heirs. We present a life-cycle model to evaluate borrower’s decision problem, taking into account long-term care expenses and house maintenance costs. We show that elders receive higher utility gains when contracting a reverse mortgage. Additionally, we perform a comprehensive quantitative analysis conducted among potential Italian subscribers to assess current levels of awareness and to identify the factors hindering access to this credit facility. It results that borrowers cope with trust issues, product complexity and, above all, emotional attachment to the property.