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Failure to refinance
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DOI：10.1016/j.jfineco.2016.01.031.png)
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Abstract
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Households that fail to refinance their mortgage when interest rates decline lose out on substantial savings. Using a random sample of outstanding US mortgages in December 2010, we estimate that approximately 20% of unconstrained households for whom refinancing was optimal had not done so. The median household would save $160/month over the remaining life of the loan, for a total present-discounted value of forgone savings of $11,500, a particularly large consumer financial mistake. To shed light on possible mechanisms, we also provide results from a mail campaign targeted at a sample of homeowners who could benefit from refinancing. (C) 2016 Elsevier B.V. All rights reserved.
Keywords:
Refinancing
Mortgage market
Household finance
Behavioral economics
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