Nearly 50 percent of homeowners who refinanced their first-lien home mortgage in the fourth quarter of 2010 lowered their principal balance by paying in additional money at the closing table, according to Freddie Mac. This is the highest “cash-in” share since Freddie Mac began keeping records on refinancing patterns in 1985. The revised cash-in share in the third quarter was 35 percent.
“Cash-out” borrowers, those who increased their loan balances by at least 5 percent, represented 16 percent of all refinance loans – the lowest cash-out share since the analysis began in 1985. The revised third quarter cash-in share was 18 percent. The average cash-out share over the past 25 years has been 62 percent.
Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative 3 percent over the median prior loan life of 4.1 years. The median interest rate reduction was about 1.25 percentage points, or a savings of 22 percent in interest costs. Over the first year of the refinance loan life, these borrowers will save more than $1,850 in principal and interest payments on a $200,000 loan.