Mortgage Refinancing and Consumption Smoothing
AbstractThis paper analyses the optimal refinancing decision of an agent whose only asset in the portfolio is the house where she lives in the context of a life-cycle model. The mortgage is modelled as an adjustable rate contract covering the remaining life of te house owner. Thus, refinancing concerns only the size of the mortgage, which can be adjusted in any period subject to a constraint on the amount that can be borrowed: the value of the new mortgage cannot exceed the latest realised price. The paper solves the model analytically and then numerically calibrates the refinancing decision.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 06/26.
Date of creation: Dec 2006
Date of revision:
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
More information through EDIRC
mortgages; refinancing; consumption smoothing;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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- Angus Deaton, 1989.
"Saving and Liquidity Constraints,"
NBER Working Papers
3196, National Bureau of Economic Research, Inc.
- Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
- Ebner, André, 2013.
"A micro view on home equity withdrawal and its determinants: Evidence from Dutch households,"
Journal of Housing Economics,
Elsevier, vol. 22(4), pages 321-337.
- Ebner, André, 2010. "A micro view on home equity withdrawal and its determinants. Evidence from Dutch households," Discussion Papers in Economics 11309, University of Munich, Department of Economics.
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