A Life Cycle Model with Housing Tenure, Constrained Mortgage Finance and a Risky Asset under Uncertainty

Zhechun He and Peter Simmons

Discussion Papers from Department of Economics, University of York

Abstract: We analyse optimal housing tenure choice (rent, buy or buy to let), consumption and a four asset portfolio in a life cycle model with uncertain labour income and asset returns (with a safe asset). Each period borrowing is possible only via a mortgage which is backed by housing collateral and which is itself subject to a loan to value and loan to income constraint. There is a minimum scale for house ownership. We derive some general theoretical properties of the solutions and closed-form solutions for specific preferences. To quantify the impact of uncertainty we simulate life cycle paths across random return and income realisations.

Keywords: Divorce; housing tenure; mortgage; life cycle (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.york.ac.uk/media/economics/documents/discussionpapers/2018/1818.pdf Main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:18/18

Access Statistics for this paper

More papers in Discussion Papers from Department of Economics, University of York Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom. Contact information at EDIRC.
Bibliographic data for series maintained by Paul Hodgson ().