Premium
Home Equity Conversion Instruments with Fixed Term to Maturity: Alternatives to End of Term Pay‐Off
Author(s) -
Weinrobe Maurice D.
Publication year - 1983
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00281
Subject(s) - maturity (psychological) , equity (law) , economics , term (time) , loan , annuity , actuarial science , home equity , residence , finance , life annuity , pension , demographic economics , psychology , developmental psychology , physics , quantum mechanics , political science , law
Standard reverse annuity mortgages obligate the lender to take on the risk that an elderly homeowner will desire to remain in a residence after the RAM has reached maturity. In this case, the best the lender can hope for is that the property will have appreciated sufficiently that the loan can be carried at interest only. There is a possibility for lender loss but not gain over contracted return. Alternatives to the standard RAM are explored in this paper with most attention devoted to shared appreciation and shared equity RAMs. These alternative instruments appear to solve the problem of maturity risk.