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A Simulation Approach To The Choice Between Fixed And Adjustable Rate Mortgages
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Book Synopsis A Simulation Approach to the Choice between Fixed and Adjustable Rate Mortgages by : William K. Templeton
Download or read book A Simulation Approach to the Choice between Fixed and Adjustable Rate Mortgages written by William K. Templeton and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Mortgage borrowers appear to have a difficult time evaluating the costs and risks associated with the choice between a fixed rate mortgage and an adjustable rate mortgage (ARM). This study uses a simulation approach to model the choice. We represent the risk of the ARM with distributions of present value cost differentials for a variety of mortgage life periods. We provide insight on the financial planning aspect by modeling the impact of mortgage rate changes on the size of payments for ARMs. Simulation can yield non-intuitive results that may lead to better decision making by borrowers.
Book Synopsis Consumer Mortgage Choice Between Fixed-rate Mortgages and Adjustable-rate Mortgages by : Hsiu-Wen Wu
Download or read book Consumer Mortgage Choice Between Fixed-rate Mortgages and Adjustable-rate Mortgages written by Hsiu-Wen Wu and published by . This book was released on 1992 with total page 386 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Borrowers' Choice Between Fixed and Adjustable Rate Mortgages by : László Szerb
Download or read book The Borrowers' Choice Between Fixed and Adjustable Rate Mortgages written by László Szerb and published by . This book was released on 1994 with total page 412 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Factors Affecting Borrower Choice Between the Fixed and Adjustable Rate Mortgages by : Mark Christopher Lino
Download or read book Factors Affecting Borrower Choice Between the Fixed and Adjustable Rate Mortgages written by Mark Christopher Lino and published by . This book was released on 1987 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Choosing Between Fixed and Adjustable Rate Mortgages by : Monica Paiella
Download or read book Choosing Between Fixed and Adjustable Rate Mortgages written by Monica Paiella and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates the determinants of households' choice between fixed rate (FRM) and adjustable rate mortgage (ARM) contracts, using the Bank of Italy's Survey of Household Income and Wealth. Contrary to the predictions of the theoretical literature, the analysis shows that most household characteristics proxying for exposure to other, non-mortgage-related risks and for individual risk aversion are irrelevant for the choice. This, in turn, crucially depends on the relative price of the mortgages and on whether the household is liquidity constrained. Liquidity constrained households find ARMs particularly attractive because their initial payments are generally lowest. This is so despite some evidence that the premium that lenders charge over their cost of funds is substantially higher on ARMs than on FRMs. Taken together, the evidence suggests that ARM holders do not fully take into account the risk of a rise of the reference interest rates. On the other hand, lenders price quite expensively this risk and borrowers end up paying a high price for the benefit of low initial payments.
Book Synopsis Economics of the Mortgage Market by : David Leece
Download or read book Economics of the Mortgage Market written by David Leece and published by John Wiley & Sons. This book was released on 2008-04-15 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis of the mortgage market is a specialised field but examines a financial market with extremely wide-ranging implications; it affects the stability of the whole economy. The key thing about this analysis is the increasing importance of the secondary mortgage market – which in the US is now several times larger than the market for government debt. The UK secondary mortgage market is also growing and the book will provide a timely resource to those active and interested in this important financial market. The 1990s saw an enormous growth of mortgage market analysis as an academic subject and there is a vast literature scattered among the key real estate journals. There is now a great need to not only bring this very complex subject area together, but also to abstract the main issues and to render them intelligible. The book will provide an organised research resource and also inform and motivate further research into the microeconomics of mortgage markets.
Book Synopsis The Myopic Choice Between Fixed and Adjustable Rate Mortgages in Flanders by : Sven Damen
Download or read book The Myopic Choice Between Fixed and Adjustable Rate Mortgages in Flanders written by Sven Damen and published by . This book was released on 2013 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Borrower's Choice of Fixed and Adjustable Rate Mortgages in the Presence of Nominal and Real Shocks by : Laacute;szloacute Szerb
Download or read book The Borrower's Choice of Fixed and Adjustable Rate Mortgages in the Presence of Nominal and Real Shocks written by Laacute;szloacute Szerb and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper concerns the conditions under which borrowers select fixed and adjustable rate mortgages. The novelty of the paper lies in its capability to analyze the effect of nominal and real shocks separately. The fixed rate mortgage (FRM) versus the adjustable rate mortgage (ARM) choice is determined by the expected real interest rate differential, initial wealth, income, expected real and nominal income risk exposure measured by different parameters the value of the house, the appreciation of the house and the influence of the variance of nominal and real shocks. Results differ according to whether or not borrowers are restricted by the loan-to-value constraint.
Book Synopsis Choosing between Fixed and Adjustable-Rate Mortgages by : Upinder Dhillon
Download or read book Choosing between Fixed and Adjustable-Rate Mortgages written by Upinder Dhillon and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reports on the determinants of the ARM choice for commercial real estate projects. The theoretical literature suggests that commercial real estate projects are more likely to be financed with an adjustable-rate mortgage (ARM) if the project's income stream or value is expected to rise with inflation over time. The empirical model estimated is a structural probit probability model of the ARM choice. Our results demonstrate that commercial borrowers typically place great emphasis on relative interest rate differentials when deciding which mortgage is best. We also find that commercial mortgage borrowers will ordinarily be reluctant to issue an ARM when the fixed interest rate is low.
Book Synopsis The Choice Between Fixed and Adjustable Rate Mortgages by : Jarjisu Sa-Aadu
Download or read book The Choice Between Fixed and Adjustable Rate Mortgages written by Jarjisu Sa-Aadu and published by . This book was released on 1987 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Choice Between Fixed and Variable Rate Mortgages by : A. Maureen O'Brien
Download or read book The Choice Between Fixed and Variable Rate Mortgages written by A. Maureen O'Brien and published by . This book was released on 1987 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Factors Affecting Borrower Choice Between the Fixed and Adjustable Rate Mortgage by : Mark Christopher Lino
Download or read book Factors Affecting Borrower Choice Between the Fixed and Adjustable Rate Mortgage written by Mark Christopher Lino and published by . This book was released on 1987 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis How Homeowners Choose Between Fixed and Adjustable Rate Mortgages? by : Yevgeny Mugerman
Download or read book How Homeowners Choose Between Fixed and Adjustable Rate Mortgages? written by Yevgeny Mugerman and published by . This book was released on 2015 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Housing is the most important asset in the portfolio of most households. Understanding the households' decision on housing finance has important implications from a policy perspective, due to the effects it may have on the housing prices, on the housing market stability and on household welfare. The theoretical literature on housing finance focused on figuring out the optimal choice between Fixed Rate Mortgages (FRM) and Adjustable Rate Mortgages (ARM). We argue that the standard economic criteria are sometimes inadequate to explain household's choices, which may be motivated by psychological factors. In other words, we claim that household's choice depends only partially on the findings of the theoretical literature. We examine the effect of changes in the short term market interest rate on the households' choice between fixed rate mortgages (FRM) and adjustable rate mortgages (ARM). We test this effect using a unique data provided to us by the Bank of Israel, which contains detailed information on the household's decision between fixed and adjustable rate mortgage contracts in Israel in the past decade. The results of our analysis demonstrate a significant association between FRM preference and short term interest rate reduction. Moreover, we find that the change in the short term interest rate is more salient to the borrowers in periods of a high interest rate environment. We attribute these findings to Tversky and Kahneman (1974) availability and representativeness heuristics.
Book Synopsis Simultaneous Estimation of Housing Demand and Mortgage Demand by : Man Cho
Download or read book Simultaneous Estimation of Housing Demand and Mortgage Demand written by Man Cho and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper establishes an econometric model for analyzing four inter-related decisions at the time of home purchase, including tenure choice, demand for housing services, choice of mortgage instrument, and decision on the amount of borrowed funds. The modeling approach employed by the study is a switching-simultaneous equation model. First, we model two sequential decisions of tenure choice and choice of mortgage type (between fixed-rate (FRM) and adjustable-rate (ARM) mortgages). Second, we specify the demand for housing services and the decision on loan-to-value (LTV) ratios as a regime-switching simultaneous model by controlling for the selectivity biases caused by the two choice factors. The empirical estimates from the model are based on two data sources: the American Housing Survey and a sample of Fannie Mae loan acquisition data. The Fannie Mae data are compiled through a synthetic matching sampling method. Our results indicate that the patterns of housing and mortgage demand are noticeably distinct between borrowers choosing ARMs versus borrowers choosing FRMs. For example, the LTV ratios significantly raise the levels of housing demand for FRM borrowers, but not for ARM borrowers, thus implying that the ARM contract tends to mitigate the effect of the wealth constraint in mortgage borrowing.
Book Synopsis What Calls to ARMs? by : Cristian Badarinza
Download or read book What Calls to ARMs? written by Cristian Badarinza and published by . This book was released on 2014 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The relative popularity of adjustable-rate mortgages (ARMs) and fixed-rate mortgages (FRMs) varies considerably both across countries and over time. We ask how movements in current and expected future interest rates affect the share of ARMs in total mortgage issuance. Using a nine-country panel and instrumental variables methods, we present evidence that near-term (one-year) rational expectations of future movements in ARM rates do affect mortgage choice, particularly in more recent data since 2001. However longer-term (three-year) rational forecasts of ARM rates have a weaker effect, and the current spread between FRM and ARM rates also matters, suggesting that households are concerned with current interest costs as well as with lifetime cost minimization. These conclusions are robust to alternative (adaptive and survey-based) models of household expectations.
Book Synopsis Mortgage Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages by : John Krainer
Download or read book Mortgage Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages written by John Krainer and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis On the Rationality of Borrowers' Behaviour by : Peter Neuteboom
Download or read book On the Rationality of Borrowers' Behaviour written by Peter Neuteboom and published by IOS Press. This book was released on 2008 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although the time and depth of the cycles differed from one European country to another, mortgage markets have grown in size. This title presents a study that highlights the role of the institutions, household characteristics, and the structure of national mortgage markets as key elements in shaping the optimal mortgage for homeowners.
