Study On Pricing Of Reverse Mortgage In China

Along with the aging of the population in China, the social characteristic― "aging without richness" has been becoming obviously, and the social security pension system which has lagged far behind is facing severe challenges, and the social security pension system is turning from the planned system the new one. The policy of family planning has been leading to a serious consequence that the "four + two + one" family structure model will dominate, which increase the difficulty of the tradition "son-for-pension" or"money-for-pension". The combination of an accelerated aging of society and the dramatic evolution of the family structure has resulted in a substantial emergency of"empty-nest"families. So, China's situation of old-age care is severe and complicated. The developed countries has been aging society for a long time and developed many valuable experiences in old-age care. It is a convenient and effective way to learn these mature and valuable experiences from developed countries and develop our old-age care products and systems which accord with the situation of China.Reverse mortgages is a kind of pension insurance financial products, proved to be of significant effect in several developed countries. Being a beneficial supplement to the social security pension system, reverse mortgages could be introduced to China, in order to improve the consumption level of the retired and poor elderly holding a suit of housing, and release enormous pressure under pension which China is facing currently.This paper systemically explains relevant theories of reverse mortgage, including basis of conclusion, basic concepts, basic features, basic elements, paying manners and the difference from the traditional mortgage. And it introduces reverse mortgages in the United States, Canada and Singapore in detail, focusing on three reverse-mortgage products and their characteristics in the United States.The key of the practice of reverse mortgage relies on its pricing. The article emphasizes on the pricing of reverse mortgage to research and expound. Based on comprehensive compare between paying-factor pricing model and actuarial pricing model and reasonable amendment from them, the pricing model of reverse mortgage which accords with current situation in our country is put forward. According to China's actual situation, numerical simulation of the single-life pricing model is applied to simulate the situation of a single male borrower and analyzes pricing simulation conclusion. There comes to conclusions that loans deserved by the borrowers are mostly limited by loan-to-value ratio, and that adopting the manner"a lump sum"can not obviously embody the advantage of being older ages. So, the absolute manner"a lump sum"should not be advocated in the design of products.Risk is the biggest obstacle of the practice of reverse mortgage. The article analyses and brings forward countermeasures related to pricing, product design, government policies, risk-control during reverse mortgages pricing to control the risk. And it is concluded that among all the risk control measures, limiting loan-to-value ratio is most feasible and effective. The ratio should be enacted from risk control and pension Security and should receive the surveillance and management from the government.