Scandinavian Working Papers in Business Administration
Finance Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No 02-22: Mortgage Choice - The Danish Case
Mikkel Svenstrup ()
Additional contact information
Mikkel Svenstrup: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: In this paper we analyze the mortgage choice faced by Danish borrowers.
Based on an analysis of the most popular Danish mortgage products,
we argue that Adjustable-Rate Mortgages (ARM) with life time caps will
combine the most attractive features from straight ARMs and callable
Fixed-Rate Mortgages (FRM). Furthermore, we find the delivery option
embedded in Danish mortgages to be an important feature, which protects
households from the risk of insolvency by facilitating a closer match
between assets and liabilities in the household portfolio.
Keywords: Mortgage; Choice; Valuation; Delivery Option; Prepayment
25 pages, May 9, 2002
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