Mortgage News from Covenant Mutual Mortgage

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More Homeowners Take Advantage of Shorter Loan Terms

More homeowners are refinancing into shorter-term loans, saving a bundle by taking advantage of the lowest rates in decades. Nearly a third of borrowers refinancing fixed 30-year loans in April through June picked loans with 15- or 20-year terms, according to housing finance giant Freddie Mac. It was the highest share since 2004. The trend has been driven by near-weekly drops in rates all summer. Average rates on fixed 15-year loans fell below 4% for the first time in mid-August, dropping to 3.92%, according to Freddie Mac. A year ago, the average 15-year rate was 4.68%. Meanwhile, the rates on fixed 30-year loans now averaged 4.44% in mid-August, Freddie Mac found. At today's rates, a borrower with a 30-year loan at a 6.5% rate and a $200,000 principal balance could save some $70,000 in interest over the life of a shorter 20-year loan. "It's borrowers looking to build equity more quickly, and borrowers have generally been paying down their loans more quickly," says Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan information. Source: USA Today

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