Eighty-two percent of homeowners who refinanced their first-lien home mortgage during the third quarter either maintained about the same loan amount or lowered their principal balance by paying in additional money at the closing table, according to new data from Freddie Mac.
Of these borrowers, 44% maintained about the same loan amount and 37% of refinancing homeowners reduced their principal balance. ‘Cash out’ borrowers – those who increased their loan balance by at least 5% – represented 18% of all refinance loans.
Freddie Mac also reports that the median interest rate reduction for a 30-year fixed-rate mortgage was about 1.2 percentage points, or a decline of about 22% in interest rate. Among the refinanced loans in Freddie Mac's analysis, the median value change of the collateral property was a -7% over the median prior loan life of almost five years.
‘Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings,’ says Frank Nothaft, Freddie Mac vice president and chief economist.