As mortgage rates drop to record lows, more homeowners are refinancing into 15-year loans in a bid to pay off their debt in time for retirement.
Freddie Mac’s latest mortgage rate survey showed the traditional 30-year fixed-rate loan averaged 3.75 percent this week, down from 3.78 percent last week.
This makes it the fifth straight week of record lows.
Almost a third of those who refinanced in the first quarter cut the duration of their mortgages to 15 or 20 years from 30, according to a recent refinancing report by Freddie Mac.
The 31 percent who shortened their terms represented the second-highest level since 2002, when 35 percent took out shorter-term loans, the data showed. In the fourth quarter of 2011, 34 percent had reduced their mortgage terms.
The all-time high occurred in 1992, with 42 percent refinancing into shorter mortgages.
During the housing boom, few refinancers even considered shorter-term mortgages, which made up just 10 percent of all refis in 2006.
To the regret of many, they instead extracted as much bubble-era equity as they could by taking on larger mortgages with long repayment times, and often with risky characteristics.