Differentiated Contracts, Heterogeneous Borrowers, and the Mortgage Choice Decision

J Sa-Aadu and C F Sirmans

Journal of Money, Credit and Banking, 1995, vol. 27, issue 2, 498-510

Abstract: Previous analyses of mortgage choice assume that adjustable rate mortagages are standard contracts and estimate bivariate models. The authors estimate a multinomial logit model that explicitly treats mortgages as differentiated contracts and provides insights on several important issues: the impact of price variables differs significantly across alternative mortgage contracts; borrower heterogeneity, particularly mobility, influences the type of contract chosen; and borrowers respond to market conditions as expected when choosing between alternative mortgage contracts. Copyright 1995 by Ohio State University Press.

Date: 1995
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