Supplementary Materials for
Optimal Mortgage Refinancing: A Closed-Form Solution

Sumit Agarwal, John Driscoll, David Laibson
Please visit the NBER web page for the associated research paper:
Working Paper 13487

Instructions for using refinance calculator:

• This worksheet calculates how far interest rates need to fall before you should refinance an old fixed-rate mortgage with a new fixed-rate mortgage.
• Begin by filling in the boxes under the heading "Basic Parameters." Default values already appear in these boxes. You should enter the numbers that apply to your own mortgage.
• Next, you can revise the information under the heading "Advanced Parameters." However, most mortgage holders should not adjust these parameters since they are already set appropriately.
• When you are done, press Calculate at the bottom of the page. Your answer will appear after the screen refreshes.

Basic Parameters Remaining mortgage principal ($) Years remaining on mortgage Interest rate on current mortgage (%) Income tax rate (%) Years you expect to remain in house Points on new mortgage (%) Other closing costs on new mortgage ($)

Advanced Parameters (These defaults may be left unchanged.) Rate at which you discount future costs (%) Average inflation rate over life of new mortgage (%) Annualized standard deviation of mortgage interest rate (%)

DISCLAIMER: This calculator describes the solution to a mathematical problem that is related to but not equivalent to a realistic mortgage refinancing decision. We make no warranty about the calculator's accuracy, performance, or value as a source of practical advice. Use entirely at your own risk. The calculator is not endorsed by the National Bureau of Economic Research, the Federal Reserve Bank of Chicago, the Federal Reserve Board, or Harvard University.

Appendix of Refinance Advice