Refinancing applications spike as mortgage rates drop
More homeowners applied for a home refinance during the week ending November 4, 2011, as mortgage rates dropped. According to Freddie Mac, the majority of homeowners who refinance either reduce their principal balance or keep it the same rather than take out cash.
The Mortgage Bankers Association (MBA) Refinance Index for the week ending November 4 shows that applications for a mortgage refinance rose by 12.1 percent over the previous week.
According to HSH.com, the average rate for a 30-year fixed-rate home loan was 4.36 percent last week, with the average rate for a 15-year fixed-rate mortgage at 3.66 percent.
“Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year,” said Mike Fratantoni, MBA’s vice president of research and economics. “Refinance applications jumped more than 12 percent to their highest level in a month and some lenders experienced even larger increases. As has been the case all year, many refinance applicants are opting to deleverage by choosing 15-year mortgages.”
Refinancing homeowners loan choices
According to Freddie Mac, 44 percent of homeowners who refinanced in the third quarter of 2011 chose to maintain their principal balance, while another 37 of those who refinanced reduced their principal balance by bringing cash to settlement. Just 18 percent of borrowers who refinanced opted for a cash-out refinance.
If you are considering a home refinance but have been concerned about having enough home equity, you may want to consult a lender about the option of a “cash-in” refinance. If you have the cash available to pay down your principal balance by a few thousand dollars, you may be able to reap the benefits of lower interest rates and reduced monthly payments.
