In the second quarter of 2011, 77 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, Freddie Mac recently reported. Of these borrowers, 51 percent maintained about the same loan amount, and 26 percent of refinancing homeowners reduced their principal balance.
“Cash-out” borrowers, those who increased their loan balance by at least five percent, represented 23 percent of all refinance loans; the average cash-out share during the 1985 to 2010 period was 46 percent.
The median interest rate reduction for a 30-year fixed-rate mortgage was approximately 1 percentage point, or a savings of nearly 18 percent in interest. Over the first year of the refinance loan life, these borrowers will save more than $1,550 in interest payments on a $200,000 loan.