A recent paper derives a formula to determine whether one should
refinance a mortgage.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1010702
Optimal Mortgage Refinancing: A Closed Form Solution
SUMIT AGARWAL
Federal Reserve Bank of Chicago - Economic Research
JOHN C. DRISCOLL
Federal Reserve Board - Division of Monetary Affairs
DAVID LAIBSON
Harvard University - Department of Economics; National Bureau of
Economic Research (NBER)
March 17, 2008
The most useful parts of the paper for individual investors will be
the numerical examples and the explanation of the factors involved,
rather than the mathematical derivation.
A mortgage calculator implementing the formula is at
http://zwicke.nber.org/refinance/
, and a survey of refinancing rules is at
http://zwicke.nber.org/refinance/appendix.py
.
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