Refinancing Improves Finances of Homeowners

By: | 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”. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.


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"I was looking at a 4.375% with Wells Fargo, my local bank, before stumbling upon via a google search. They hooked me up with a longstanding savings and loan bank of which I closed on a 30 year fixed rate of 3.75% with. I'd recommend anybody looking at refinancing or buying a home give free rate a shot."

-Joe Klien, Detroit, MI