MCLEAN, VA -- (Marketwire) -- 02/12/13 -- In the fourth quarter of 2012, 27 percent of borrowers that refinanced an existing mortgage chose to shorten their loan term, based on the Freddie Mac (OTC: FMCC) finance%2ftab_refinance.html">Quarterly Product Transition Report released today. Further, refinancing borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.
•Of borrowers who refinanced during the fourth quarter of 2012, finance%2ftab_refinance.html">27 percent shortened their loan term, while 69 percent of borrowers kept the same term as the loan that they had paid off; 4 percent chose to lengthen their loan term.
•More than 95 percent of refinancing borrowers chose a fixed-rate loan. Fixed-rate loans were preferred regardless what the original loan product had been. For example, 83 percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the fourth quarter, the highest share since the second quarter of 2010, while the remaining 17 percent chose to refinance back into a hybrid ARM.
•Those borrowers who refinanced under the Home Affordable Refinance Program (HARP) were more likely to take out a long-term, fixed-rate mortgage. For example, of HARP borrowers who were refinancing out of an ARM, more than 95 percent chose a fixed-rate mortgage; in contrast, of borrowers that had an ARM but did not refinance through HARP, more than one-third opted for another ARM.
•Based on 2012 calendar year data for finance%2ftab_refinance.html">twelve large metropolitan areas, borrowers who lived in lower-priced metropolitan areas were generally more likely to shorten their term compared to borrowers living in very high-cost housing markets. For the U.S. as a whole, 29 percent of borrowers shortened their loan term when refinancing. Whereas, 43 percent of borrowers in the Dallas metropolitan area shortened their term, compared with 14 percent of those in the San Francisco metropolitan area.
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