Equity Release Mortgages

This chapter is dedicated to equity reversemortgages,which are greatly affected by negative equity so implicitly by real-estate risk. For reverse mortgages negative equity is not a trigger for defaults as with standard mortgages. The lenders may be able to overcome negative equity situations if the loans are not terminated during a period of negative equity. Reversemortgages open a new frontier for applications of real-estate derivatives. They are an important asset class for the future and they will facilitate a better distribution of risks in society, helping elderly people to overcome cash provision problems and also helping governments to reduce the burden of increasing costs for long-term care.