Equity release

This article needs additional citations for verification. Please help by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources:  –  ·  ·  · scholar · JSTOR (February 2012) (Learn how and when to remove this template message)

Equity release is a means of retaining use of a house or other object which has capital value, while also obtaining a lump sum or a steady stream of income, using the value of the house.

Pricing of no negative equity guarantee[]

The UK Prudential Regulation Authority expressed concerns in 2018 that firms investing in ERMs should 'properly reflect' the cost of the no-negative-equity guarantee. Its consultation paper CP 13/18, published 2 July 2018, provided a benchmark for valuing the guarantee. The paper recommended modelling the guarantee as a series of put options expiring at each period in which cash flows could mature, weighted by the probability of mortality, morbidity and pre-payment, using a version of the Black–Scholes pricing formula. It recommended that the underlying price of the option should reflect the cost of deferred possession of the property, independent of any assumptions about future property growth, warning that many of the approaches presented to it implicitly assumed negative deferment rates.^[1]

United States[]

This section is empty. You can help by . (July 2010)

See also[]

• Mortgage loan
• Equity loan
• Mortgage law
• UK mortgage terminology
• Reverse mortgage, the American equivalent
• PIV, the Italian equivalent

Notes[]