Financial Sophistication and Housing Leverage Among Older Households

Hyrum Smith (), Michael Finke and Sandra Huston ()

Journal of Family and Economic Issues, 2012, vol. 33, issue 3, 315-327

Abstract: Increasing mortgage debt among older households has been cited as evidence of financial distress caused by low financial knowledge, poor lending practices, and an increased appetite for debt. This paper investigates whether housing leverage among older households is related to financial sophistication, tax effects, and a desire to increase portfolio allocation to risky assets. Results indicate a time trend in low housing leverage, but no trend in high housing leverage. While housing leverage increases with liquidity constraints, it also increases with financial sophistication, and tax and portfolio incentives are strongly related to high housing leverage. The incentive to borrow against home value created by the deductibility of mortgage interest appears to encourage greater housing leverage and vulnerability to housing price shocks. Copyright Springer Science+Business Media, LLC 2012

Keywords: Debt; Financial sophistication; Leverage; Mortgage; Older (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10834-012-9293-4 (text/html)
Access to full text is restricted to subscribers.

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:kap:jfamec:v:33:y:2012:i:3:p:315-327

Ordering information: This journal article can be ordered from
http://www.springer. ... es/journal/10834/PS2

DOI: 10.1007/s10834-012-9293-4

Access Statistics for this article

Journal of Family and Economic Issues is currently edited by Joyce Serido

More articles in Journal of Family and Economic Issues from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().