Investments in home improvements or renovations alter the value of a home. The level of this investment into one’s own home could be influenced by the Loan-To-Value ratio leading to a possible...Show moreInvestments in home improvements or renovations alter the value of a home. The level of this investment into one’s own home could be influenced by the Loan-To-Value ratio leading to a possible extra way limits on Loan-To-Value ratios influence housing prices. This thesis attempts to shed light on the relationship between the Loan-To-Value ratio of a home purchase and the level of home improvement or renovations an individual invests in later on. It does so by using a collection of regressors from the broader literature on home improvement and performing both an Ordinary Least Squares (OLS) and an Instrumental Variable regression (IV). Results from the OLS regression show that though there is reason to assume the Loan-To-Value ratio is impactful on home improvements from a theoretical standpoint, it ceases to be a significant predictor if the size of a home is taken in to account. This thesis also confirms previous research on the determinants of home improvement as it finds that the age of a home, the length of time an individual has lived there and a person’s income are significant predictors. The results of the IV regression support this conclusion, but as instruments used are relatively weak the results from this IV regression could be biased and lack substantial statistical explanatory power.Show less
