Mortgage Refinancing and Consumption Smoothing
This 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.
|Date of creation:||Dec 2006|
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"Saving and Liquidity Constraints,"
Econometric Society, vol. 59(5), pages 1221-1248, September.
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- Viola Angelini & Peter Simmons, "undated". "Housing Debt, Employment Risk and Consumption," Discussion Papers 05/07, Department of Economics, University of York.
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