The Effects of Mortgage Debt on Assets and Total Resources among Near-Retirement Households

This study investigated the long-term relation between household leverage through the use of mortgages, and changes in household wealth using the theoretical framework of the life cycle income hypothesis. This study used the 1992 through 2002 waves of the Health and Retirement Study. The characteristics of leveraged and unleveraged households were compared. The relation between household leverage and changes in assets and total resources over the period was modeled using robust regression analysis. Retained or incurred mortgage debt during the study period, relative to not having mortgage debt, had a consistent negative effect on changes in assets and total resources. However, for high-income and more risk-tolerant households, mortgage debt was beneficial and enhanced increases in assets and total resources. Implications for consumers, financial professionals, educators, and tax policymakers were drawn from the results of the study.

Home economics

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