Homeowners’ Refinancing Efforts Pay Off in Third Quarter

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Tobias Nergarden of the Real Estate Marketing Insider comments on news in AOL that a whopping 83 percent of refinancing consumers came through the refinancing process with positive results.

Mr. Nergarden of REMI offered his observations on news from AOL that of the consumers in 2012’s third quarter that attempted to refinance their home loans, 83 percent were met with positive outcomes, like lower interest rates or payments; Mr. Nergarden said that this was excellent news for consumers and a sign of a healthy market with better confidence in consumers.

Refinancing is an process whereby holders of an existing mortgage, usually issued in more severe economic conditions, undergo a new mortgage application process in order to get a better set of lending terms. In its report this week, Freddie Mac released new data on refinancing and its effect on American home loans.

The news was overwhelmingly good: during the third quarter of 2012, 83 percent of buyers who attempted to refinance their loans achieved positive results. 29 percent of those were able to reduce their mortgage obligations by making larger payments, while the remaining 54 percent stayed on the same payment amounts. On average, refinancing resulted in an interest-rate reduction of about 1.7 percent. That reduction in interest, a 31-percent decline, is the largest that Freddie Mac has documented in its 27 years of market analysis.

To provide some perspective, a $200,000 mortgage is fairly common for a home or small office for a real estate marketing agency. A 1.7-percent interest reduction after refinancing means that the borrower will save about $3,500 per year in interest payments. At a time when consumer confidence is increasing but banks’ confidence in lending to consumers is not, the positive news about refinancing points to a frendlier climate for new borrowers, as well as ones with existing loans that may have been hit hard by the financial crisis.

Consumers, it seems, have also taken notice of the friendly market for refinancing. In the same report, Freddie Mac observed that of all mortgage applications received in Q3, 82 percent of those were for refinancing. That figure matches the all-time high percentage of refinances, reported in 2010’s fourth quarter. Like borrowers in 2010, today’s mortgage holders also benefit from the government’s Home Affordable Refinance Program (HARP). HARP primarily allows borrowers whose loan-to-value ratio exceeds 80 percent to refinance without also purchasing mortgage insurance. Loans refinanced through HARP received, on average, 2-percent interest reductions in the third quarter.

The Real Estate Marketing Insider’s Tobias Nergarden commented on news that refinancing opportunities for mortgage holders yielded overwhelmingly positive results, with 83 percent of refinance applicants improving or maintaining their payment plans. In the third quarter of 2012, 82 percent of mortgage applications received were for refinancing.

The Real Estate Marketing Insider is an online publication that provides trend analysis, breaking news and hot trade tips to real estate professionals. REMI is based in La Jolla, CA.

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