During the housing boom, many homeowners could not wait to refinance their homes into longer mortgages and pull out cash for other uses. These days, it seems that homeowners cannot wait to refinance into shorter loan terms and pour more money into their mortgages. Baby boomers in particular are finding shorter-term, higher-payment mortgages to be extremely attractive, in many cases because they want to pay off their homes before they retire. The result: nearly a third (28 percent) of all refinanced loans in the first quarter of this year were for shorter terms, and many boomers are opting for extremely short terms like 10 years. Low interest rates also make these mortgages a potentially good move, since for a few hundred dollars more a month you can save tens of thousands of dollars in interest.
With mortgage interest rates rising on rumors of quantitative easing (QE) tapering from the Fed, many homeowners do not feel that they can wait any longer to refinance. Community banks, among the primary providers of 10-year mortgages, say that more and more customers are coming to them seeking these loans, and one bank reported that the 10-year-mortgage market makes up a fifth of all its residential mortgage originations. 10-year loans presently have fixed rates as low as 2.3 percent, but they require solid credit histories and large down payments.
by Carole VanSickle