The mortgage refinance decision
an equation-based model
DOI:
https://doi.org/10.61190/fsr.v12i4.4774Keywords:
Prepayment, Loans, Mortgage, RefinancingAbstract
Given recent historically low interest rates, homeowners have been heavily involved in the process of refinancing their home mortgages. This paper examines current refinance analysis methods, and finds most advocate various forms of break-even analysis. In essence, these methods primarily differ with respect the variables considered, complexity of analysis, and solution accuracy. This paper develops an equation-based model that considers the generally relevant variables, while decreasing the complexity of analysis to the solution of an equation. In addition, the model permits an effective comparison of alternative loan terms, determines the expected refinance savings, and solves for the opportunity gain or loss of a refinance deferral.
Downloads
Published
Issue
Section
License
Copyright (c) 2003 Academy of Financial Services
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Author(s) retain copyright and grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows to share the work with an acknowledgment of the work's authorship and initial publication in this Journal.
This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.
