Reverse Mortgage in Italy: LifeCycle Theoretical Approach vs. Empirical Evidences

The recent increase in life expectancy, while reflecting improvements in living standards, implies long retirement periods, high long-term care expenses and pressure on the pension system. The elderly often hold valuable real estate assets but lack the liquidity to face the demands of consumption needs and medical expenses (house-rich and cash-poor). In this framework, Reverse Mortgage (RM) may constitute a valid financial support: it allows elder homeowners to borrow money against their home while maintaining the right to live in it. 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 transferred to the heirs. Despite its availability in Italy, RM remains relatively underutilized. In this study, we provide useful insights into the Italian RM market and investigate the reasons behind its limited adoption.