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After the great recession : financial sophistication and housing leverage

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  • Kyoung Tae Kim
  • Martin C. Seay
  • Hyrum L. Smith

Abstract

US households face various choices in saving for retirement, with one of the most common decisions related to maintaining or paying off a mortgage. Using the 2010 and 2013 Survey of Consumer Finances, this study investigates the relationship between financial sophistication and mortgage decisions among middle-age households. A Heckman two-stage selection model is employed to investigate two separate decisions: mortgage holding and loan-to-value (LTV) ratios among mortgage holders. Results indicate that financial sophistication is positively associated with carrying a mortgage and higher LTV ratios. These results imply that financially sophisticated households may be using leverage to increase asset returns.

Suggested Citation

  • Kyoung Tae Kim & Martin C. Seay & Hyrum L. Smith, 2016. "After the great recession : financial sophistication and housing leverage," Applied Economics Letters, Taylor & Francis Journals, vol. 23(18), pages 1285-1288, December.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:18:p:1285-1288
    DOI: 10.1080/13504851.2016.1150944
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    Cited by:

    1. Kyoung Tae Kim & Somer G. Anderson & Martin C. Seay, 2019. "Financial Knowledge and Short-Term and Long-Term Financial Behaviors of Millennials in the United States," Journal of Family and Economic Issues, Springer, vol. 40(2), pages 194-208, June.

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