NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Mortgage Refinancing: A Closed Form Solution

Sumit Agarwal, John C. Driscoll, David Laibson

NBER Working Paper No. 13487*
Issued in October 2007
NBER Program(s):       AP    EFG    PE

We derive the first closed-form optimal mortgage refinancing rule. The expression is derived by using the Lambert-W function to solve a tractable class of mortgage refinancing problems. We calibrate our solution and show that our quantitative results closely match those reported by researchers who use numerical methods.

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