A recent report from Freddie Mac on home owners who are refinancing shows surprising new trends. Prior to the mortgage melt-down, a substantial percentage of home owners who refinanced their homes took out equity in their homes in the form of a cash-out loan. The report shows that during the 2nd Quarter of 2011, 77% of the home owners who refinanced either kept nearly the same loan amount or reduced their loan principle by paying in extra money at the closing of the new loan. The study found that only 23% of home owners took a cash-out loan when refinancing.
The report found the median interest rate for the refi was approximately 1 percent lower than the original loan. This resulted in a savings of almost 18% in interest paid during the first year of the new refinanced loan.
Home interest rates have just hit a new low and I heard recently of loans between 4.2% and 4.3% with no points. These kind of rates can make refinancing your home attractive and with lower interest you could consider moving to a shorter term loan as well and only have a small increase in your monthly payment. Moving from a 30 year loan to a 15 year loan can save you tens of thousands of dollars in interest, build the equity in your home faster and provide you a home you own free and clear in a much shorter time.
If you are considering a home purchase these new rates, coupled with low home prices, can increase your buying power allowing you to better afford a home you have already seen or move you to a higher price point. Contact me if you would like a referral to a great lender to explore all of your options.