Borrowers will save on net more than $1 billion in interest payments over the coming year as they continue to shorten their payment terms and build equity in their homes, Freddie Mac’s first quarter 2014 quarterly refinance analysis found.
Looking at the borrowers who refinanced during the first quarter, 39% shortened their loan term, up slightly from the previous quarter and the highest since 1992.
Meanwhile, in the first quarter, an estimated $6.5 billion in net home equity was cashed out during a refinance of conventional prime-credit home mortgages. This is not too far off from the previous quarter and $2 billion less than the same time one year ago.
At its peak, cash-out refinance volume was $84 billion during the second quarter of 2006.
"Roughly 17% of borrowers who refinanced in the first quarter chose to extract home equity, versus 14% from the same time last year. This is well below the peak cash-out share of 89% the market experienced in the third quarter of 2006,” Frank Nothaft, Freddie Mac vice president and chief economist, said.
“However, even with the slight increase in the cash-out share, it's still $2 billion less compared to first quarter of last year simply because the refinance share of originations continues to plummet," Nothaft added.