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Refinancing your home can be a smart move — especially if mortgage rates have dropped, you need some extra cash, or your financial circumstances have changed and you need a lower payment. But mortgage refinancing isn’t always the right move — nor is it always a possible option.
Here’s what you need to know about refinancing (and doing so multiple times):
- How many times can you refinance your home?
- Reasons why you might refinance your home more than once
- What you should know before refinancing again
- Should you refinance your home again?
How many times can you refinance your home?
For the most part, you can refinance your mortgage as many times as you like. Some lenders have rules and time limits in place for refinances (particularly cash-out refinances), but these vary and aren’t set in stone.
The exception is if you’re applying for a streamline refinance on an FHA or VA loan. According to the rules, at least 210 days must have passed from your closing date and at least six months since the first payment was due in order for you to qualify with an FHA or VA loan.
Regardless, that doesn’t mean it’s always the right time to refinance. There are certain times when mortgage refinancing might be a smart move and many others when you may want to hold off in order to get the best terms and rates.
Reasons why you might refinance your home more than once
There are lots of reasons to refinance — and even to refinance more than once. Most homeowners refinance to save money, whether it’s for the long term or short term.
Here are a few reasons you might want to consider refinancing:
- You want to lower your interest rate
- You want to remove private mortgage insurance
- You want to reduce your monthly payment by extending your loan term
- You need extra cash (cash-out refinance)
- You want to pay off your loan sooner (refinancing into a shorter-term loan)
Here are a few times it might not be a good idea to refinance again:
- Rates haven’t fluctuated much (or have increased) and you’re happy with your term
- Your loan has a prepayment penalty
- You’re not sure you’ll be in the home long
Learn More: How to Refinance Your Mortgage in 4 Easy Steps
What you should know before refinancing again
The most important thing to remember about refinancing is that it isn’t completely free. Just like with your first mortgage, you’ll need to cover closing costs and usually an appraisal fee when refinancing your home. Typically, refinancing closing costs run between 3% and 6% of the total loan amount.
Because of this, you’ll need to make sure you’ll eventually reach the breakeven point — or the point at which your savings outweigh the money you paid to refinance the loan.
Aside from the costs, you’ll also want to consider:
- The time it takes: Refinancing requires a lot of paperwork and documentation, so be prepared for this before making your move.
- The current state of the mortgage market: Qualifying standards, rates, and other facets of the mortgage market are always in flux. Make sure it’s the right time to achieve your goals.
- Any prepayment penalties on your current loan: Some lenders charge a fee if you pay off your loan too soon. Factor this penalty in if your current lender would charge this.
- Your financial situation and credit: Your debts, income, credit score, and more will all play a role in your ability to qualify for a refinance (and what rate you get when you do). A refinance will also most likely require a hard credit pull, which could lower your credit score.
If you’re looking to do a cash-out refinance, you’ll also need to have a good amount of equity in your home. If you’ve already done a cash-out in the past, then you might have less than you think.
Most lenders will only let you borrow up to 80% of your home’s total value in a cash-out refinance, so if you’re already nearing that point, there likely isn’t a whole lot of equity for you to cash in on.
Should you refinance your home again?
There’s no hard and fast number of times you can refinance — or when you should refinance. But overall, you’re better off looking at it on a case-by-case basis, taking into account your current loan and finances, the overall market, and your long-term goals as a homeowner.
If you do decide refinancing is the right move, make sure to shop around for your lender. Comparing multiple rates at once could save you thousands over the course of your loan term — and Credible Operations, Inc. makes this easy to do by filling out a single form.