Refinancing Trends

: Chris Lee Law Firm

  Filed under: Refinancing

refinancing a mortgageNow that mortgage interest rates have hit historic lows, the consumer interest in refinancing offers has peaked. Despite all the trouble with the foreclosure crisis, many homeowners are surviving and have yet to experience any threat by way of mortgage debt. As a result, more borrowers are becoming interested in refinancing as a solution to lower payments before it is even financially necessary.

Trade Off

About 20 years ago the typical mortgage was a 30 year fixed interest mortgage loan. These loans were the standard simply because the  majority of Americans could not afford to buy a home with the interest rates as high as 13%. Spreading out the interest fees over 30 years made home ownership affordable in the late 1980s and 1990s. However, interest rates began to slowly decline after the year 2000, but many people ended up in home bigger than they could afford due to the push for variable interest rate mortgages. These adjustable rate mortgages have placed a considerable mark on the trouble with foreclosures, but are no longer considered advocated by many industry analysts.

As refinancing offers have begun to peak in recent months, it is reported that 2 in 5 refinanced mortgages have moved from a 30 year fixed rate to a shorter loan term. This means that many people are trading in their longer loan term for a 15 or 20 year mortgage at a lower rate. Interestingly, this does very little to lower the monthly payment, but shows that paying off the mortgage faster has become priority over lower payments for many homeowners. The remainder of refinanced mortgages move from variable to fixed interest rate loans, a move that is highly recommended for anyone who has already suffered at least one inflation in monthly payment due to adjusting rates.



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