After the great recession : financial sophistication and housing leverage |
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| Authors: | Kyoung Tae Kim Martin C. Seay Hyrum L. Smith |
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| Affiliation: | 1. Department of Consumer Sciences, University of Alabama, Tuscaloosa, Alabama, USA;2. School of Family Studies and Human Services, Kansas State University, Manhattan, Kansas, USA;3. Department of Finance and Economics, Utah Valley University, Orem, UT, USA |
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| 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. |
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| Keywords: | great recession financial sophistication mortgage housing leverage survey of consumer finances |
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