Freddie Mac: More than 95% of Q3 Refinancers Choose Fixed-Rate Loans

In the third quarter of this year, 29 percent of borrowers who refinanced opted for a shorter loan term, while only 3 percent chose a mortgage with a longer term, according to data from ""Freddie Mac"":http://www.freddiemac.com/.

Most borrowers--68 percent--decided to maintain the same term on their loan.

[IMAGE] [COLUMN_BREAK]

Freddie Mac also reported more than 95 percent of refinancers selected a fixed-rate loan. Eighty-two percent of borrowers who started with a hybrid ARM decided to go with a fixed-rate mortgage. The figure is the highest share since the second quarter of 2010. For those who began with a 1-year ARM, 81 percent transitioned into a fixed-rate loan.

Home Affordable Refinance Program (HARP) refinancers were more likely to go with a longer-term mortgage, with 25 percent of HARP refinancers shortening their loan term compared to 31 percent of non-HARP refinancers.

In a release, Frank Nothaft, Freddie Mac VP and chief economist, explained the benefits of shorter-term mortgages.

""Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about 0.7 percentage points lower during the third quarter,"" Nothaft said. ""For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Further, a shorter-term, fully amortizing loan reduces the loan balance faster and builds home equity sooner.""