There was an excellent article recently over at HousingWire.com that focused on a new study from The National Bureau of Economic Research. Here are some excerpts from that piece:
Approximately 20% of households for whom refinancing would be optimal are throwing over ten grand a year away due to their failure to take action.
“Despite the large stakes, anecdotal evidence suggests that many households may fail to refinance when they otherwise should. Failing to refinance is puzzling due to the large financial incentives involved. However, certain features of the refinance decision make failing to refinance consistent with recent work in behavioral economics,” the report said.
NBER stated borrowers are road blocked for three distinct reasons:
-It is difficult for borrowers to calculate the financial benefit to refinancing due to the very limited experience borrowers have with the complexities of transactions of this type.
-The benefits of refinancing are not immediate, but rather accrue over time.
-There is high amount of up-front costs, both financial and non-financial, that households must pay in order to complete a refinance, including a re-evaluation of their financial position and the value of their home.
“All of these features provide a psychological basis for why some households may fail to take up large savings,” NBER said.
The upshot is that millions of Americans who would benefit from a refinance to a better mortgage are still waiting on the sidelines. Contact us in the sidebar today to look into your government-backed refinance options.