More borrowers are shortening their mortgage terms, and are considering paying off their mortgage a possible feat. Record low interest rates has allowed more borrowers to refinance their loans from 30 years to 15- or 20-year terms.
A recent Freddie Mac report shows that 31 percent of recent refinancers shortened their loan terms, which is the second highest level since 2002.
“Historically low rates and an average three-quarters of a percentage point difference between 30- and 15-year mortgage fixed-rate mortgages are important drivers for moving to a shorter term,” Frank Nothaft, Freddie Mac’s chief economist, told The New York Times.
Fifteen-year fixed-rate mortgages reached a new record low last week, averaging 2.97 percent, according to Freddie Mac’s weekly mortgage market survey. The 30-year fixed-rate mortgage also reached a new record low last week, averaging 3.75 percent.
People are paying off their mortgages at a faster rate because they feel the real estate market is improving and real estate prices are increasing once again. Before no one wanted to pay down their mortgage when every month they were losing equity.