Equity release

Providing liquidity from illiquid assets

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

## Pricing of no negative equity guarantee

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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

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Main article: Reverse mortgage

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

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## See also

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

## Notes

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1. ^ "Consultation Paper CP 13/18" (PDF). Bank of England. 2 July 2018. Retrieved 5 August 2018.

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Mortgage loan

Financial literacy

Interest rate type|

* fixed-rate mortgage
* adjustable-rate mortgage / variable-rate / floating rate

Repayment type|

* Continuous: Repayment mortgage / self-amortized
* Repayment at term: interest-only mortgage (endowment mortgage)
* No repayment: reverse mortgage
* Hybrid: balloon payment mortgage
* equity release (shared appreciation mortgage)

Variable payment|

* flexible mortgage (offset mortgage, mortgage accelerator)
* graduated payment mortgage loan

Other variations|

* buy to let mortgage
* foreign currency mortgage
* foreign national mortgage
* wraparound mortgage

Key concepts|

* Annual percentage rate (APR)
* Foreclosure / Repossession

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