Maximizing Home Equity or Preventing Home Loss: Reverse Mortgage Decision Making and Racial Inequality

Abstract

BACKGROUND AND OBJECTIVES: Reverse mortgages are loans that allow older homeowners to borrow from their home equity with no repayment due until the borrower dies or moves out of the home. We currently know very little about how homeowners evaluate and experience reverse mortgages as solutions to their financial and housing needs in later life. Furthermore, despite an increasingly diverse population of reverse mortgage borrowers, we know little about how social inequalities may contribute to reverse mortgage decisions and their outcomes. In this paper, we examine reverse mortgage decision-making and experiences in a racially and economically diverse sample of older US homeowners. RESEARCH DESIGN AND METHODS: We conducted 44 in-depth interviews with older homeowners who were considering or who had obtained a reverse mortgage loan. We inductively and iteratively developed a thematic coding scheme that was applied to all interview transcripts. RESULTS: Our analysis produced a dichotomous schema of reverse mortgage decision making that was shaped by social and economic opportunities and constraints. For some participants, reverse mortgages represented strategic tools used to maximize home equity and its benefits. For others, it was an option of last resort to which participants turned when faced with the imminent loss of their home. DISCUSSION AND IMPLICATIONS: Focusing on reverse mortgages, our analysis suggests way that social inequalities may be reproduced through financial decisions and the unequal landscapes of opportunity in which they are made.

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