Refinancing Borrowers Overwhelming Pick Shorter Term Loans

As we see each week in the Mortgage
Bankers Association’s application survey, few borrowers chose adjustable rate
mortgages when buying or financing a home. 
This is borne out by Freddie Mac’s Quarterly Product Transition Report
which found that 95 percent of borrowers who were refinancing during the fourth
quarter of 2011 chose a fixed rate loan as their new mortgage.

Virtually none of the borrowers who refinanced
a traditional one-year adjustable rate mortgage (ARM) chose to replace it with
another one, although slightly over a third traded for a hybrid ARM which have
a fixed rate for a period of three, five, seven, or 10 years and then usually
convert to a loan that adjusts every year. 
Forty-two percent of borrowers with a hybrid ARM refinanced into another
hybrid of some type.  About 3 percent of FRM
borrowers refinanced into hybrids.

More borrowers chose shorter term loans
in Quarter Four.  Forty-three percent of
borrowers who refinanced a 30-year FRM chose a 15 or 20 year variety, the
highest percentage on record, and 77 percent with a 20-year traded it in for a
15 year.  Only about 19 percent of
fixed-rate borrowers picked longer-term loans when refinancing…

…(read more)

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