Borrowers who took advantage of near record-low mortgage rates in 2014 will save approximately $5 billion in interest over the next 12 months, according to Freddie Mac’s quarterly refinance analysis.
The report showed homeowners were also opting into shorter loan terms (34% of refinances) and choosing the stability of long-term fixed-rate mortgages (95% of refinances) as 2014 came to an end, according to data from the 22 largest metro areas and four U.S. Census regions.
Homeowners who refinanced in the fourth quarter averaged an interest rate reduction of approximately 1.3 percentage points, equating to nearly $2,500 in interest payments during the next 12 months on a $200,000 loan. HARP refinancers boasted an average reduction of 1.6 percentage points, amounting to average savings of $3,300 in interest payments over the next 12 months.
“Lower mortgage rates, coupled with greater house prices appreciation last year, also brought about a larger share of borrowers cashing out home equity at the time of refinance,” said Len Kiefer, Freddie Mac deputy chief economist.
While the percentage of cash-out refinances ticked up, the $6.7 billion net home equity cashed out for conventional prime-credit home mortgages in the fourth quarter remains low compared to historical volumes. Metro areas with median home value declines, such as Detroit and Tampa, saw the lowest shares of “cash-out” borrowers.
Mortgage rates are still near record-lows. If you are interested in your options for refinancing, contact one of our mortgage bankers. For more information on the basics of refinancing, download our Refinance Guide.