Research On Developing Reverse Mortgage In China

As Chinese aging society is coming, the retirement pressure is pop out increasingly, Chinese people must face to the aging crisis practically. Different from the developed countries, our country coming into aging society in advance with incompletely developed economy and low income per capita, we are short of usable retirement resources, we do not have a sound society security system, and we have a huge amount of pension funds gap. Therefore, our retirement pressure is more severe and more complex than that of the developed countries. The developed countries had come into the aging society for a long period, and their society security system are more perfect. So, use the developed countries' successful aging experience as reference, and develop our own suitable financial instruments for pension to realize the institutional and conceptional innovation is very important. Therefore, the research on developing the reverse mortgage in China at the proper opportunity is attaching importance to the society.In the developed countries, there is an effective financial instrument for pension, the reverse mortgage. The reverse mortgage is a financial instrument that can help to lighten the impoverishment of the aged people effectively, and its cash flows' direction is opposite to that of the traditional mortgage. In a reverse mortgage, the aged people (the borrower) who have the property rights of the real estate mortgaged their house to the creditor, and after the evaluation of the house, the creditor pay the cash flows to the borrower according to the net value of the house until the borrower die; when the borrower die or when the loan mature, the creditor will acquire the property right of the house and will dispose the house to pay back the loan and its interests. The aged people can transform their rigid real estate assets into the liquid cash assets through the reverse mortgage, and solve a part of pension problem.The paper first introduces the reverse mortgage's intention, characteristics, the theoretical basis, the main risk and prevention and the pricing model, then analyzes the successful experience of the reverse mortgage in the developed countries such as U.S., Canada, U.K. and Japan. Base on these analyses, there is a practical consideration of developing the reverse mortgage in China: analyzes its necessity and feasibility, and discusses the selection of the operation agency, the designation of the operation mechanism, the obstacles of developing reverse mortgage in China and policy recommendations. Wish the paper can provide some theoretical supports and operation ideas to help developing the reverse mortgage into China at the proper opportunity.