Seniors’ Home Equity Extraction: Credit Constraints and Borrowing Channels

46 Pages Posted: 4 Feb 2016 Last revised: 18 Apr 2018

See all articles by Stephanie Moulton

Stephanie Moulton

Ohio State University- John Glenn College of Public Affairs

Samuel Dodini

Cornell University, College of Human Ecology, Students

Donald R. Haurin

Ohio State University (OSU) - Economics

Maximilian D. Schmeiser

Amazon Lending

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Date Written: March 22, 2017

Abstract

Households borrow against home equity through different channels: closed end home equity loans or revolving lines of credit, cash-out refinancing, and—for senior homeowners—reverse mortgages. The objective of this study is to identify the factors that affect seniors’ home equity borrowing by channel, focusing on the effect of house price dynamics and credit constraints. Ours is the first study to model the choice of reverse mortgages alongside other modes of equity borrowing. Our primary finding is that as home equity levels increase, cash-out refinancing and reverse mortgages increase in credit-constrained areas, while HELOCs increase in less-credit-constrained areas.

Keywords: equity extraction, mortgages, home equity, household finance, reverse mortgages

JEL Classification: D12, R21, G21, J14

Suggested Citation

Moulton, Stephanie and Dodini, Samuel and Haurin, Donald R. and Schmeiser, Maximilian D., Seniors’ Home Equity Extraction: Credit Constraints and Borrowing Channels (March 22, 2017). Available at SSRN: https://ssrn.com/abstract=2727204 or http://dx.doi.org/10.2139/ssrn.2727204

Stephanie Moulton (Contact Author)

Ohio State University- John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Samuel Dodini

Cornell University, College of Human Ecology, Students ( email )

Ithaca, NY
United States

Donald R. Haurin

Ohio State University (OSU) - Economics ( email )

154 N. Oval Mall
1010G Derby Hall
Columbus, OH 43210-1172
United States
614-292-0482 (Phone)
614-292-9530 (Fax)

Maximilian D. Schmeiser

Amazon Lending ( email )

Seattle, WA 98144
United States

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