The Mortgage Piggy Bank: Building Wealth Through Amortization

Mortgage amortization schedules are illiquid savings plans comparable in size to pension programs; however, little is known about their effects on wealth accumulation. Using individual administrative data and plausibly exogenous variation the timing of home purchase (ex. childbirth-driven) around a 2013 Dutch reform, we find near one-for-one rise net worth for each dollar amortization. Households leave other liabilities unchanged, instead increase labor supply reduce consumption. Effects hold even regular savers older households. This has important macroprudential implications suggests homeownership financed via amortizing mortgages instrumental household building.