The Mortgage Piggy Bank: Building Wealth through Amortization

60 Pages Posted: 30 Apr 2020 Last revised: 13 Oct 2021

See all articles by Asaf Bernstein

Asaf Bernstein

University of Colorado at Boulder; National Bureau of Economic Research (NBER)

Peter Koudijs

Erasmus University Rotterdam

Multiple version iconThere are 2 versions of this paper

Date Written: October 2021


Mortgage amortization schedules are among the largest savings plans in the world (ex. U.S. households contribute hundreds of billions of dollars annually to these “mortgage piggy banks”). However, little is known about their effects on wealth accumulation. Ex-ante, the effect is unclear. It depends on the fungibility of home equity and other savings, and households’ willingness to adjust consumption or leisure. Empirically, effects are difficult to identify since amortization and other savings choices are typically co-determined. We overcome this challenge by utilizing a 2013 Dutch reform that increased amortization requirements for new mortgages. Using detailed administrative data, we compare savings decisions for home-buyers right before or after the reform. We use plausibly exogenous variation in the timing of home purchase coming from life-events (ex. birth of a child) to address selection concerns. We find that marginal wealth-building from amortization (MWA) is substantial. Remarkably, households leave non-mortgage savings untouched and cut consumption and leisure instead, implying a near 1-for-1 rise in net-worth. Results hold five years out when the additional amortization-induced home equity is larger than the stock of liquid savings, suggesting substantial amounts of amortization-driven wealth-building over a typical business cycle. Effects are ubiquitous and hold for unconstrained households, who could easily offset the additional amortization by reducing non-mortgage savings, and movers, suggesting a broad applicability of our results. Overall, our results highlight the critical importance of mortgage amortization for household wealth-building and macroprudential policies.

Keywords: Mortgage, Amortization, Wealth, Fungibility, Homeownership, Macroprudential policies

JEL Classification: G4, G5, G19, G21, G51, J3, R2

Suggested Citation

Bernstein, Asaf and Koudijs, Peter, The Mortgage Piggy Bank: Building Wealth through Amortization (October 2021). Stanford University Graduate School of Business Research Paper No. 3569252, Available at SSRN: or

Asaf Bernstein (Contact Author)

University of Colorado at Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter Koudijs

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
Rotterdam, 3062PA


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