By Diana Olick, CNBC Correspondent NEW YORK ( CNBC) -- U.S. home owners are refinancing their mortgages at the fastest clip since 2005, but the difference now is they are putting cash in, not taking it out. At the going rate, 25% of all first-lien U.S. mortgages will be refinanced this year, according to LPS Applied Analytics. That represents about $7.1 billion -- just through June of this year -- in savings on monthly payments, according to economists at Freddie Mac, who ran the numbers for this report. Seven years ago, refinancing wasn't about saving on monthly payments; it was about pulling cash out. Homeowners extracted close to a trillion dollars collectively in home equity in 2005 and largely put it toward home remodeling, swimming pools, cars, vacations and retail spending. Today, 81% of homeowners refinancing their first-lien mortgages either kept the same loan amount or lowered their principal balance by paying-in additional money at closing, according to Freddie Mac.
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Dan Green/Waterstone Mortgage, Ohio: Not all households are choosing to reduce payments. Many are choosing to reduce term. At today's rates, the first payment of a 15-year mortgage is comprised of 67% principal. To get that point on a 30-year mortgage would take 18 years. More homeowners are asking about amortization schedules, and the benefits of paying extra principal each month. There's more talk of saving than spending. Julian Hebron/RPM Mortgage, California: Refi to lower payment, but keep making previous payment to pay loan down faster. Example: If you use our average loan of $550,000 and super-conforming rates of 3.5% now vs. 4.5% a year ago, a borrower's payment drops from $2,787 to $2,429 (this factors in the paydown of $550,000 to $541,000 over 12 months). If a borrower keeps making old payment on new loan, thereby paying loan down by an extra $358 per month, they cut 6 years (or 20%) off a 30-year term. Suffice it to say, when it comes to home equity, we have fast become the anti-ATM society, by will or by force (we don't have a whole lot of home equity anymore). After trillions of dollars in lost home equity, Americans now appear to want it back so badly that they're willing to pay it in themselves. They also want less debt for a shorter period of time. This sounds like responsible, conservative fiscal planning, but it also means that savings from rock-bottom interest rates do not get paid back into the economy the way so many politicians and analysts have suggested. --Written by Diana Olick at CNBC