Refinancing homeowners are going short
By Bill Briggs
Many customers take 30-year loans down to 15 or 20
After being blindsided by a job loss last spring, sales exec Ren Chirakos didn’t need his new MBA degree to calculate the scary numbers: The math got simple real fast.
Zero income + new COBRA bills + a house payment = something had to give in the Chirakos family budget. The answer: refinancing his 30-year home loan to a shorter mortgage that tapped into the trend of ever-shrinking interest rates.
“I needed to keep my house,” said Chirakos, who since has found work at a different company in Cuyahoga, Ohio. His wife is a stay-home mom who cares for their two daughters. “It forces you to look at 'OK, where is our money going?' You start looking for ways to shave fixed expenses. It really gives you cause to think.”
Chirakos was paying 5.375 percent on a 30-year loan before he became a victim of downsizing at toolmaker Snap-on Inc. As rates sank and slipped over the summer, he watched and waited. Then he pounced, locking in a 20-year, fixed-rate loan at 4.3 percent and slashing $140 off the monthly bill for his $220,000 home. With excellent credit and little debt, the re-fi cost him $900, so will pay for itself in about six months. “Every little bit helps,” he said.
For many refinancing homeowners, going shorter is suddenly more appealing. Fixed mortgages of 15 and 20 years are quickly gaining fans among those who previously held 30-year loans, balloon mortgages and adjustable rates, according to a new report from mortgage giant Freddie Mac. The number of fixed-rate, 15- and 20-year loans are at their highest level since 2004, the government-controlled company said.
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