The Research On The Pricing Of Without Redemption Right Reverse Mortgage

Our country is facing more and more serious aging problem. According to the data published by the National Aging Committee Office, the elderly population will exceed 300 million until 2025. The aging population grow rapidly, increasing pension costs put huge pressure on government finances. As a result, the government have to find new supporting resource for elderly and pay close attention to Reverse Mortgage. Reverse Mortgage has developed fast in American.One of the most popular is the Home Equity Conversion Mortgage, which has occupied more than 90% of the U.S. Reverse Mortgage market.The key factor of reverse mortgage is to determine a reasonable price, This article choose actuarial pricing method to determine the price of without redemption right reverse mortgage. Firstly, put the rate of rent and non-performing loan ratio to the O-J actuarial pricing model. Then, under the condition of fixed interest rate and floating interest rate, I run MATLAB software for monte carlo simulation for the price.Two conclusions can be dropped: one is the price under the floating interest rate is higher than the fixed interest rate; The other one is the old of single life state can receive more loan amount than those in double life state. Lastly, compare the price which get from the new pricing model with our country reverse mortgage. The monthly basic insurance amount is lower than the price. According to the difference, this article put forward that we should combine the support of the government and market to develop Reverse Mortgage in our country, the government should play the role of the last guarantor and the policy makers.