Pricing Research Of Housing Reverse Mortgage Based On Variable Credit Limit Hypothesis

In the research field of housing reverse mortgages, pricing research has always been at the centre, which matured gradually in the long-term study of scholars. But in the former pricing researches, scholars generally supposed that housing reverse mortgage has fixed price or credit limit. However, through observation and argument, I found that the credit limits of housing reverse mortgages in reality have not always been fixed. For example, the Home Keeper in America allows the borrower to share the benefit of housing appreciation, namely, increasing line of credit when the housing appreciation is better than expected.In addition, even if the credit limit of housing reverse mortgages stays fixed, when the present value of housing in future grows up, borrowers can redeem the mortgage due to the rights of advanced redemption and apply for a new one to obtain greater line of credit, and when the present value of housing in future decreases, lending institutions may freeze some of the credit limit under the pressure of bankruptcy. Therefore, from the view of either the borrowers or lending institutions, it is equal to that a kind of housing reverse mortgage with variable credit limit exists in the market.Based on the above observation and argument, this article put forward an innovative hypothesis, namely, it supposed that there exist a kind of housing reverse mortgage with terminally variable credit limit in the market. Then it started the pricing research to evaluate this terminal credit limit. The basic research thoughts in this paper are as follows.Firstly, it proposed the central hypothesis with its relevant system designs, and demonstrated the rationality and feasibility in this hypothesis. Secondly, it deduced the terminal credit limit model of housing reverse mortgage based on the central hypothesis, and evaluated the compositive variables in this model, including estimated exact figures of the terminal safety margin coefficient by using Monte Carlo Simulation. Finally, it applied the terminal credit limit model to estimate the future credit limit of borrower in the case, and conducted relevant sensitivity analysis.