An empirical analysis of residential mortgage refinancing decision making

Virmani, Swati and Murphy, Austin (2010) An empirical analysis of residential mortgage refinancing decision making. Journal of Housing Research, 19 (2). pp. 129-138.

Abstract

This research empirically investigates the relative optimality of several different methods of making refinancing decisions on residential mortgages. The results indicate that a simple rule of refinancing whenever the mortgage rate has dropped 1% was approximately as effective as application of an option pricing model in minimizing the cost of financing over the 1980–2007 interval.