November 13, 2013 3:57 am
-Of borrowers who refinanced during the third quarter of 2013, 37 percent shortened their loan term, up 5 percent from the previous quarter and the highest since 1992. Further, 40 percent of those who refinanced outside of HARP took out a shorter-term loan, while 32 percent of HARP borrowers shortened their term. Borrowers who kept the same term as the loan that they had paid off represented 59 percent and only 4 percent chose to lengthen their loan term.
-The net dollars of home equity converted to cash as part of a refinance remained low compared to historical volumes. In the third quarter, an estimated $6.4 billion in net home equity was cashed out during a refinance of conventional prime-credit home mortgages. The peak in cash-out refinance volume was $84 billion during the second quarter of 2006. Adjusted for inflation, annual cash-out volumes during 2010 through 2013 have been the smallest since 1997.
-The average interest rate reduction was about 1.8 percentage points - a savings of about 30 percent. On a $200,000 loan, that translates into saving about $3,500 in interest during the next 12 months. For all borrowers that refinanced during the third quarter, the estimated interest savings over the next 12 months will be about $6 billion. Homeowners who refinanced through HARP during the third quarter of 2013 benefited from an average rate reduction of 1.9 percentage points and will save an average of $3,850 in interest during the first 12 months, or about $320 every month.
-About 85 percent of those who refinanced their first-lien home mortgage maintained about the same loan amount or lowered their principal balance by paying in additional money at the closing table. That's just shy of the 88 percent peak during the second quarter of 2012.
-More than 95 percent of refinancing borrowers chose a fixed-rate loan. Fixed-rate loans were preferred regardless of what the original loan product had been. For example, 86 percent of borrowers who had a hybrid ARM refinanced into a fixed-rate loan during the second quarter. In contrast, only 3 percent of borrowers who had a fixed-rate loan chose an ARM.
-With mortgage rates remaining below 5 percent for most of the past four years, relatively few homeowners with loans taken in this period would have much incentive to refinance. Consequently, the median age the original loan was outstanding before refinance increased to 6.7 years during the third quarter, the most since the analysis began in 1985.
Published with permission from RISMedia.