Although borrowers who refinance their mortgage are given the option to shorten their loan term, the majority keep it the same, according to Freddie Mac.
The government-sponsored enterprise's Quarterly Product Transition Report said that 68 percent of borrowers kept the same term, while 29 percent reduced their term in the third quarter. Three-percent chose to lengthen their loan term.
Additionally, the report found that 95 percent of borrowers chose a fixed-rate loan. Borrowers who refinanced through the Home Affordable Refinance Program were more likely to take out a long-term, fixed-rate mortgage.
"Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about 0.7 percentage points lower during the third quarter," said Frank Nothaft, vice president and chief economist at Freddie Mac. "For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term."
In a separate report, the GSE found that 83 percent of borrowers who refinanced in the third quarter were able to reduce their debt, while 54 percent maintained the same amount.