A third of U.S. homeowners who refinanced their mortgage loans in the fourth quarter of 2009 reduced the amount of principal balances, according to Freddie Mac. Thirty-three percent of borrowers lowered their mortgage debt, the highest "cash-in" share recorded since Freddie Mac began keeping track of the data back in 1985.
The quarterly Refinance Report also showed that the number of borrowers who increased their loan balance by at least 5% was 27%, which was a record low.
Mortgage Rates Reduced
"One-half of borrowers who refinanced their conventional loans during the quarter lowered their annual mortgage interest rate by at least 0.9 percentage points below the old rate. In aggregate, the lower interest rate translates into about $2 billion in payment savings for these homeowners over the first 12 months of the new loan," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
Millions of Mortgages Underwater
Fewer cash-out refinancings indicate that Americans are continuing to tighten their belts to cut spending and boost their savings. Also, many homeowners are unable to do a home refinance and take money out of their properties because housing values have fallen so much. About a quarter of all U.S. homeowners, or nearly 11 million, are underwater on their mortgages, or owe more than their houses are worth, according to First American CoreLogic.
Refinancing Can Cut Your Mortgage Bill
While some homeowners won't be able to refinance, there are many people who can still take advantage of some of the lowest mortgage rates ever. Consider a home refinance if you can shave at least one percentage point off your mortgage rate, have more than 20% equity in your home, receive a regular income, and plan to stay in your home long enough to recoup the closing costs. Compare mortgage quotes here.