Failure to refinance

Benjamin Keys, Devin Pope and Jaren Pope

Journal of Financial Economics, 2016, vol. 122, issue 3, 482-499

Abstract: 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.

Keywords: Refinancing; Mortgage market; Household finance; Behavioral economics (search for similar items in EconPapers)
JEL-codes: G02 G11 G21 R21 R31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (105)

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Working Paper: Failure to Refinance (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:122:y:2016:i:3:p:482-499

DOI: 10.1016/j.jfineco.2016.01.031

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