Borrowers who refinanced in 2013 will save on net approximately $21 billion in interest over the next 12 months, according to Freddie Mac’s fourth quarter 2013 quarterly refinance analysis.
Of borrowers who refinanced during the fourth quarter of 2013, 39 percent shortened their loan term, up 2 percent from the previous quarter and the highest since 1992. Borrowers who kept the same term as the loan that they had paid off represented 56 percent, and only 5 percent chose to lengthen their loan term.
The net dollars of home equity converted to cash as part of a refinance remained low compared with historical
volumes. In the fourth quarter, an estimated $6.5 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 in the fourth quarter was about 1.5 percentage points -- a savings of about 25 percent. More info on this page of the Freddie Mac website.
On another note, about 2 in 5 borrowers shorten their loan terms when they refinanced last year, and over 95% of refinancing borrowers chose a fixed-rate loan.
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