Freddie Mac: 83% of Q3 Refinancers Maintain or Cut Debt

The vast majority of homeowners who refinanced in Q3 2012 either maintained or slashed their loan debt, according to a release from ""Freddie Mac"":http://www.freddiemac.com/.

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In the year's third quarter, 83 percent of homeowners who refinanced their first-lien home mortgage either kept the same loan amount or lowered their principal balance by paying-in additional money at the closing table, the GSE revealed. That percentage fell just short of the record 85 percent recorded during Q4 2011.

Of those borrowers, 54 percent maintained about the same loan amount, while 29 percent reduced their principal balance.

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""On average, borrowers who refinanced reduced their interest rate by about 1.7 percentage points,"" said Frank Nothaft, VP and chief economist at Freddie Mac. ""On a $200,000 loan, that translates into saving about $3,500 in interest during the next 12 months.""

Refinances done under the Home Affordable Refinance Program (HARP) had an average interest rate deduction of 2 percentage points.

Interest rates on fixed-rate mortgages hit new lows during September, he added, with 30-year product averaging 3.5 percent and 15-year averaging 2.8 percent during the month. In addition, according to Freddie Mac's ""Primary Mortgage Market Survey"":http://www.freddiemac.com/pmms/, 82 percent of loan applications during the third quarter were for refinance, matching the record share of the fourth quarter of 2010.

In response, Nothaft said Freddie Mac is boosting its origination projection for the second half of the year to account for additional refinance activity.

Among the refinanced loans analyzed by the GSE, the median depreciation of the collateral property was 10 percent over the median prior-loan life of 4.8 years. For loans refinanced under HARP the median depreciation in property value was about 31 percent, and the prior loan had a median life of about 5.6 years.

Approximately $7.7 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages, up from $5.9 billion in the third quarter. However, cash-out volume remained low compared to the $84 billion beak in Q2 2006.