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Freddie Mac: 84% of refinancing homeowners maintained or reduced debt

Freddie Mac released its fourth quarter analysis Monday, revealing that 84% of refinancing homeowners either maintained or reduced their principal balance by paying-in additional money at the closing table.

This percentage barely fell short of the record 85% during the fourth quarter of 2011.

Of these borrowers, 46% maintained the same loan amount, while 39% of homeowners reduced their principal balance 

Interest rate reduction averaged 1.8 percentage points, or a savings of about 33% in interest rate, totaling the largest percent reduction in the 27 years of Freddie Mac’s analysis.

"On average, borrowers who refinanced reduced their interest rate by about 1.8 percentage points. On a $200,000 loan, that translates into saving about $3,600 in interest during the next 12 months,” said Frank Nothaft, Freddie Mac vice president and chief economist.

For loans that were financed via the Home Affordable Refinance Program, the median depreciation in property values was 29%, the prior loan had a median age of about 5.9 years and the HARP borrower with a 30-year fixed-rate refinance averaged a 2.0 percentage-point interest-rate reduction.

"While all borrowers that refinance have benefitted, HARP has enabled many borrowers that traditionally would not have had access to refinance to obtain low rates and significantly reduce their interest rate and monthly payment. This increases the likelihood that these borrowers will continue to perform on their loan and remain homeowners," added Nothaft.

For all non-HARP refinances, the median property was relatively unchanged in property value, the prior loan had a median age of 3.7 years and borrowers with a 30-year fixed-rate refinance averaged a 1.5 percentage-point interest-rate reduction.

mhopkins@housingwire.com

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