Investigating a Psychological Perspective of Reverse Mortgage : - How is Reverse Mortgage Perceived by Potential Borrowers in Sweden?

Abstract

It is evident that in the future the population in the world will consist of a larger proportion of elderly compared with today. The population in Sweden will also have an increasing number of elderly and the economic situation for many of these elderly will be difficult and many will suffer from poverty. However, many elderly in Sweden are house rich and cash poor and thus have their wealth tied up in this illiquid asset. A suggested viable solution to improve the difficult economic situation for elderly that needs extra income and owns a house is a financial instrument called reverse mortgage.Reverse mortgage was introduced on the Swedish market 2002. Despite the potential on the Swedish market reverse mortgage has had a limited widespread among Swedish potential reverse mortgage borrowers. Considering what previously has been mentionedand that reverse mortgage still is an unexplored research area, this study aims to answer the question how is reverse mortgage perceived by potential borrowers in Sweden? The purpose of this study is to get a deeper understanding of perceptions regarding reverse mortgage held by potential borrowers. Furthermore this study has an approach of constructivism and hermeneutic and is inductive with elements of deduction. In order to answer the research question and fulfill the purpose of this study a qualitative research strategy has been used. In line with this research strategy a focus group with seven potential reverse mortgage borrowers in Sweden has been conducted. This study´s theoretical frame of reference consists of three parts. These three parts are reverse mortgage, psychology and behavior finance. This theoretical frame of reference is together with the gathered empirical data from the focus group the basis of this study´s conclusions and contributions. This study contributes with new knowledge to the research area of reverse mortgage.The new knowledge contributes to create a deeper understanding of potential reverse mortgage borrowers’ perceptions in the focus group. Some of the most significant findings are that the focus groups initial negative perception changed to become more positive towards reverse mortgage which indicates an evolution of perception regarding reverse mortgage. The study also contributes to disclose new reasons when potential borrowers would take the loan, new feelings and characteristics associated with the loan by the potential borrowers in the focus group