A new study indicates that a significant number of individuals who refinanced their home mortgages put themselves in a stronger position to get out of debt.
According to the study conducted by mortgage giant Freddie Mac, nearly 40 percent of homeowners who refinanced their first mortgage in the third quarter reduced the amount they owed on their mortgage, while 44 percent kept roughly the same balance.
The survey also detailed the types of mortgages borrowers took out and by how much they cut their mortgage payments. For example, the median interest rate reduction for individuals with a 30-year fixed-rate mortgage was about 1.2 percentage points, or what amounts to a 22 percent interest rate decline.
"That translates into saving $2,500 in interest during the next 12 months," said Frank Nothaft, vice president and chief economist at Freddie Mac. "Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings."
To refinance at a prime interest rate, borrowers should be sure they have a strong credit score. Before applying, they may want to review their credit report in order to check for any unfairly reported marks.