Mortgage debts took a turn for the better in the third quarter, as Freddie Mac reported that a large amount of refinancing homeowners were able to either maintain or reduce their mortgage debts.
In total, 82 percent of homeowners who refinanced were able to maintain their loan amount or lower their principal balance by contributing additional funds to the closing process. Of that 82 percent, 44 percent maintained their amount while 37 percent reduced their payments.
Frank Nothaft, the vice president and chief economist at Freddie Mac, said that the savings gained from refinancing are clear.
“The typical borrower who refinanced reduced their interest rate by about 1.2 percentage points,” Nothaft said. “On a $200,000 loan, that translates into saving $2,500 in interest during the next 12 months.”
In similarly positive news, Freddie also reported that the median reduction for 30-year FRMs was 1.2 percent, or a 22 percent decline in interest rate. Also, “cash-out” borrowers are at an increasingly lower rate – they represented just 18 percent of new refinanced loans, and the net dollars of home equity that was converted into cash during refinancing was at its lowest level in 16 years.
“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings,” Nothaft said. “Fixed-rate mortgage rates hit new lows during September, with 30-year product averaging 4.11 percent and 15-year averaging 3.32 percent that month, according to our Primary Mortgage Market Survey.”