Homeowners who refinanced their mortgages last year should have some extra coin in their pockets this year: $5 billion worth of saved interest in the first 12 months.
Only about 52% of mortgages made in 2014 were refinancings, but sharp declines in average mortgage rates during the last three months of the year created a mini refinancing boom, according to the Mortgage Bankers Association.
During the fourth quarter, borrowers who refinanced cut their mortgage rate by almost one-fourth, or by an average interest-rate reduction of 1.3 percentage points, according to Freddie Mac. That translates to mortgage interest savings of about $2,500 in the first 12 months on a $200,000 loan.
Some 29% of borrowers took cash out at the time of refinancing, up from 2013 but still a pittance compared with mid-2006, shortly before the housing bubble burst, when 89% of borrowers dipped into their equity and took cash out at closing.
The agency estimates that refinance activity will slow this year, because interest rates are expected to rise and so many homeowners already have refinanced.
©2015 Chicago Tribune. Distributed by Tribune Content Agency
