Time to Homeownership and Mortgage Design: Income Sharing and Saving Incentive

Homeownership for young, middle-low income earners decreased due to accumulated student loans, stringent covenants, pressure of strong rental market, household expenditure growth and negative wage-house price growth gap. We... [ view full abstract ]

Homeownership for young, middle-low income earners decreased due to accumulated student loans, stringent covenants, pressure of strong rental market, household expenditure growth and negative wage-house price growth gap. We finance-engineer an income sharing mortgage: borrowers pledge a portion of their future income to cover the initial deposit and become homeowners by obtaining 100% LTV mortgage straight away. Useful in periods of higher uncertainty and less expensive in high interest rate environment, this mortgage embeds incentives to save, reducing overall systemic risk of the banking sector. Consequently the default risk is not higher than a plain vanilla mortgage with lower LTV.