SHORT TERM BORROWERS ATTRACTED BY LOW MORTGAGE RATES

With the 15-year rate at below 3% recently, about 3 in 10 refinancers are opting for loans of less than 30 years, in the June 1st article by E. Scott Reckard in the Los Angeles Times.
Freddie Mac’s latest mortgage rate survey showed the average interest rate for a 15-year fixed loan at 2.97%. It was the first sub-3% reading in the nearly 21 years that Freddie has tracked the 15-year loan.
During the housing boom, “People were getting 30-year interest-only loans, and they were pulling out all the cash they could,” said Richard T. Cirelli, president of RTC Mortgage Corp., a Laguna Beach loan brokerage.
“Now it’s just the opposite — they want shorter-term loans, and they’re strategizing to get the mortgage payoff to coincide with their retirement,” Cirelli said. “We’re seeing 20-year loans, 15-year loans and even quite a few 10-year loans.”
Instead of cash-out loans, some borrowers are even putting cash in when they refinance, he said — for example, to get their balances down to $417,000 for a one-unit property, the maximum amount at which the lowest interest rates are available.
Also contributing to the trend: recent changes in the Obama administration’s Home Affordable Refinance Program, which cut the fees for certain borrowers getting new loans if they reduce the term of the mortgage to less than 30 years.

Posted on June 5, 2012 at 8:32 am
Nancy Low | Category: Buyers, News, Sellers

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