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The Rise and Fall of Serial Refinancers

mortgage-payment-dueHomeowners eager to lower their mortgage payments by refinancing their home more than once have returned to the housing market. Their last debut occurred during the housing boom.

Black Knight Financial Services February 2016 Mortgage Monitor report found that serial refinancers played a large role in the rise and fall of refinance volumes throughout 2015 driven by interest rate fluctuations.

According to the report, rate and term refinances from borrowers who've had their prior mortgage for less than 2 years rose by 800 percent from the first quarter of 2014 to the first quarter 2015 as interest rates dropped. Of these borrowers, two-thirds of these refinances in the fourth quarter were from borrowers who had their mortgage from less than four years.

During the housing peak from 2005 to 2006 nearly all refinance volume was coming from borrowers who held their prior mortgage for less than 4 years, Black Knight reported.

Although interest rates have been on a roller coaster of fluctuations over the last year,rate and term refinances from borrowers who've held their mortgage for less than six years have remained steady.

"Term reductions remain popular among borrowers taking advantage of low rates; not surprisingly they are more popular among more aged loans, as borrowers don’t want to restart the clock on their mortgage," the report said.

Black Knight found that 37 percent of rate and term refinances in the fourth quarter of 2015 included a term reduction. The average loan age of term reduction refinances is 81 months (nearly 7 years) compared to 60 months for those with the same or an increased term. Meanwhile, only 3 percent of rate and term refinances included a term increase, which is historically low.

As term reduction refinances grow in popularity, the active mortgage sector shifts as well: 5 percent of all active mortgages had 20-year original terms (highest share in over 10 years); 16 percent are 15-year original term; and 2.5 percent are 10- year original term (down slightly from last year), according to Black Knight.

Click here to view the full report.

About Author: Xhevrije West

Xhevrije West is a talented writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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