Refinancing Improves Finances of Homeowners
By: Rosemary Rugnetta | February 5th, 2013
According to the latest release of Freddie Mac’s fourth quarter refinance analysis, refinancing improves the finances of homeowners. Refinancing has been a large part of the mortgage industry’s business for the year 2012.
As reported by Freddie Mac, in the fourth quarter of 2012, 84% of homeowners who refinanced their first lien mortgage either maintained or lowered their principal mortgage balance (cash in refinance) which is lower than the 85% that did so during the same period 2011. Of this number, 46% maintained around the same loan amount and 39% reduced their mortgage balance. The interest rate reduction averaged around 1.8%, a savings of approximately 33% in interest rate and the largest percent reduction in 27 years of analysis.
Volume for cash out refinances remained low. An estimated $8.1 billion in net home equity was taken as cash out as compared to $84 billion during the second quarter of 2006.
HARP refinances showed a median depreciation in property value of 29%. The prior loan had a median age of around 5.9 years and the HARP borrower with a 30 year fixed rates refinance had an average interest rate reduction of 2.0%.
According to Frank Nothaft, VP and Chief Economist of Freddie Mac, “”On average, borrowers who refinanced reduced their interest rate by about 1.8 percentage points. On a $200,000 loan, that translates into saving about $3,600 in interest during the next 12 months. Fixed-rate mortgage rates hit new lows during December, with 30-year product averaging 3.4 percent and 15-year averaging 2.7 percent that month, according to our Primary Mortgage Market Survey”.
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