In the first quarter of 2011, 75 percent of homeowners who refinanced their first-lien home mortgage either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table, according to a report by Freddie Mac. In addition, 21 percent of refinancing homeowners reduced their principal balance.
“Cash-out” borrowers, those who increased their loan balance by at least five percent, represented 25 percent of all refinance loans; the average cash-out share over the past 25 years was 62 percent.
The median interest rate reduction for a 30-year fixed-rate mortgage was approximately 1.2 percentage points, or a savings of about 20 percent in interest costs. Over the first year of the refinance loan life, these borrowers will save more than $1,800 in interest payments on a $200,000 loan.