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Financial literacy and mortgage equity withdrawals

John Duca and Anil Kumar ()

Journal of Urban Economics, 2014, vol. 80, issue C, 62-75

Abstract: Mortgage equity withdrawals (MEW) are correlated with covariates consistent with a permanent income framework augmented for credit-constraints. We assess linkages between MEW and financial literacy/education using the Health and Retirement Study (HRS) and Panel Study of Income Dynamics (PSID). We find that the financially literate are 3–5 percentage points less likely to withdraw housing equity via non-home equity loan mortgages using the HRS, while college graduates are 5 percentage points less likely than those without a high school degree in the PSID. Among those withdrawing housing equity in the PSID, college graduates extract significantly less equity and are less likely to have high levels of housing leverage after doing so.

Keywords: Mortgage equity withdrawals; Financial literacy; Consumption; Credit constraints (search for similar items in EconPapers)
JEL-codes: G21 R21 D14 E21 E32 E44 E51 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Financial literacy and mortgage equity withdrawals (2011) Downloads
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