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Structuring and Pricing Home Equity Release with Better Sharing of House Price Risks

Andrews, Doug W. and Oberoi, Jaideep S (2018) Structuring and Pricing Home Equity Release with Better Sharing of House Price Risks. Working paper. tbc (Submitted) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)

Abstract

We present the structure and pricing of a home-equity-release product designed for senior homeowners with a more efficient risk-sharing than traditional reverse mortgages. The homeowner borrows against their home with the protection of a nonegative-equity-guarantee (NNEG), but the repayment is based on the return on a regional house-price-index and a fixed premium to cover the NNEG. This product provides greater access to equity release for retirement-age homeowners and a wider range of investment products for investors. The rearrangement of the payoff structures described in our model allows for higher upfront loan to value ratios than have traditionally been available in the industry. We illustrate the associated payoffs with the use of 20 years of home sales data from the United Kingdom (UK), up-to-date UK mortality data, and an updated UK morbidity study.

Item Type: Monograph (Working paper)
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Jaideep S Oberoi
Date Deposited: 04 Dec 2018 17:36 UTC
Last Modified: 30 May 2019 08:27 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/70633 (The current URI for this page, for reference purposes)
Oberoi, Jaideep S: https://orcid.org/0000-0002-1101-7612
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