Mortgage shopper's dream come true

As noted last week, borrowers often make costly transactional mistakes because they know less than the loan providers they deal with, who are motivated to exploit their information advantage. A borrower who pays 5 percent when she could have gotten 4.875 percent if she had known what her loan provider knew has made a transactional mistake.

Borrowers make lifestyle mistakes for the same reason, and also because lifestyle decisions are often complicated, and borrowers tend to overweight short-term benefits and underweight long-term costs. A borrower who refinances to reduce her payment at the cost of owing substantially more after five years may have made a very costly lifestyle mistake.

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