LendingTree Survey Reports Only 1 in 3 Borrowers Refinance into a Shorter-Term Mortgage

30-year fixed rate home loans are still the most popular among refinancers; borrowers miss out on shorter-term mortgage savings

Jan 16, 2013, 12:18 ET from LendingTree

CHARLOTTE, N.C., Jan. 16, 2013 /PRNewswire/ -- Only one-third of homeowners who have refinanced their existing mortgage in the last three years realized the benefits of a shorter-term home loan, according to a new LendingTree survey of 1,060 homeowners conducted online by Research Data Technology, Inc. from November 16 to  27, 2012. Approximately 62 percent of homeowners refinanced an existing mortgage into a loan of the same term, with only 27 percent realizing the benefits of refinancing into a shorter term. However, borrowers shaved on average two percentage points off their mortgages after refinancing, regardless of the mortgage term.

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In 2012, over 69 percent of homeowners refinanced into a 30-year fixed rate mortgage, according to LendingTree data. Roughly 13 percent of homeowners refinanced into a 15 year fixed rate mortgage, and 9.5 percent refinanced into a 20-year fixed rate mortgage. In 2011, 55 percent of homeowners refinanced into a 30-year fixed rate mortgage, while 21 percent refinanced into a 15-year fixed rate mortgage and 13 percent into a 20-year fixed rate mortgage.

"Shorter-term refinances are not as popular among borrowers as they should be," said Doug Lebda, chairman and CEO of LendingTree. "Current economic conditions are driving borrowers to focus primarily on lowering the monthly payment and they may be overlooking the traditional benefits of shorter-term mortgages such as paying off the loan faster, paying less towards interest and building more equity."

The average mortgage rate offered by lenders on the LendingTree network, over the last 30 days, was 3.46 percent for a 30-year fixed rate refinance loan, compared to 2.84 percent for a 15-year fixed rate mortgage and 3.37 percent for a 20-year fixed rate mortgage..

"Loans with earlier payoffs carry less risk for lenders, and often result in lower interest rates for the borrower. So it's possible to refinance into a shorter-term and reduce the overall mortgage payment," continued Lebda. "Borrowers should explore all loan options to determine which loan best suits their short term and future financial goals. A good rule of thumb is to refinance at a term equal to or less than your current term, if possible and affordable for the borrower."

The chart below illustrates the interest rate savings of refinancing into shorter term mortgages for a mortgage with a current rate of 5.5% and a loan balance of $250,000. While mortgage payments increase slightly as the term shortens, the savings on interest grows dramatically.


December 2012


Loan Amount



Interest Paid

Life of Loan

Interest Savings

 from Current


Current loan (30-year Fixed Rate)


$250,000 balance




30-year Fixed Rate






20-year Fixed Rate






15-year Fixed Rate






For only $14.15 per month, the borrower would save an additional $60,000 over the course of the mortgage and would be able to pay off the mortgage ten years earlier than if they were to refinance into another 30-year fixed.

About the Survey

1,060 homeowners shared their views on the process and experience of obtaining a mortgage. These homeowners obtained a purchase mortgage or refinanced and existing mortgage in 2009 or later. They participated in an online survey conducted by Research Data Technology, Inc. on behalf of LendingTree, LLC on November 16 – 27, 2012. The 1,060 survey respondents represent a random sample of homeowners selected from a consumer panel of individuals in the U.S. who have access to the Internet. The margin of error in this survey is plus or minus 3.0%. This means that in 19 cases out of 20, survey results based on 1,060 respondents will differ by no more than 3.0 percentage points in either direction from what would have been obtained by seeking the opinions of all eligible individuals in the U.S. who are online.

About LendingTree, LLC
LendingTree, LLC is the nation's leading online source for competitive home loan offers, empowering consumers during the mortgage, refinance or auto loan process. LendingTree provides an online marketplace which connects consumers with multiple lenders that compete for their business, as well as an array of online tools and information to help consumers find the best loan. Since inception, LendingTree has facilitated more than 30 million loan requests and $214 billion in closed loan transactions. LendingTree provides access to lenders offering mortgages and refinance loans, home equity loans/lines of credit, and more. LendingTree, LLC is a subsidiary of Tree.com, Inc. (NASDAQ: TREE). For more information go to www.lendingtree.com, dial 800-555-TREE, join our Facebook page and/or follow us on Twitter @LendingTree.

CONTACT: Megan Greuling, +1-704-943-8208, Megan.Greuling@tree.com


SOURCE LendingTree