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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
- Cost to refinance
- 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’d like. Some lenders have rules in place for refinances (particularly cash-out refinances), but these vary and aren’t set in stone.
However, there are exceptions. Some loan types have mandatory waiting periods (seasoning) and require that the current loan be seasoned for a specific amount of time:
- FHA streamline refinance: If you’re applying for a streamline refinance on an FHA home loan, at least 210 days must have passed from your closing date and at least six months since the first payment was due.
- FHA cash-out refinance: If you want to apply for an FHA cash-out refinance loan and you currently have a first mortgage on the home, you must have made at least six payments to qualify.
- VA loans: For VA interest rate reduction refinance loans (IRRRLs) and cash-out refinance loans, the rules are the same as an FHA streamline refinance: At least 210 days must have passed from your closing date and at least six months since the first payment was due before you can refinance your VA loan.
Regardless, that doesn’t mean it’s always the right time to refinance. Mortgage refinancing might be a smart move in certain situations, but other times, 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
You may want to refinance for many reasons — and even refinance more than once. Most homeowners refinance to save money, whether it’s for the long term or short term.
Some of the best reasons to refinance include:
- You want to lower your interest rate. If rates have dropped since you took out your current mortgage loan, or you’re planning to move in the next few years and could benefit by switching from a fixed-rate loan to an adjustable-rate mortgage, refinancing can help you secure a lower interest rate.
- You want to remove private mortgage insurance. Chances are, your home’s value has increased since you last refinanced. In the event you’re paying PMI based on your home’s original valuation, refinancing will eliminate your PMI payments as long as you have at least 20% equity.
- You want to remove FHA mortgage insurance premiums. If you have more than 20% home equity but you pay MIP for the life of your FHA loan, you can eliminate mortgage insurance by refinancing into a conventional loan.
- You want to reduce your monthly payment by extending your loan term. A term refinance, where you finance into a new first mortgage with a longer term, will reduce your payments by stretching them out over a longer period of time.
- You need extra cash. With sufficient equity, you can get a cash-out refinance to pay off your current mortgage and replace it with a new, larger loan. You’ll receive the difference as a lump-sum cash payment.
- You want to pay off your loan sooner. Although you can simply make extra principal payments to pay off your mortgage early, not everyone has that kind of discipline. Refinancing into a shorter-term loan might be a better option.
On the other hand, refinancing might not be a good idea if:
- Rates haven’t fluctuated much (or have increased) and you’re happy with your term. There’s no benefit to refinancing unless your new mortgage will save you money on interest or make your monthly payments more affordable.
- Your loan has a prepayment penalty. A refinance pays off your existing loan and replaces it with a new first mortgage. If your current loan has a prepayment penalty, the payoff might trigger it.
- You’re not sure you’ll be in the home long. You’ll need time to break even on the closing costs associated with refinancing your mortgage. If you sell the home before that breakeven point, you’ll lose money.
Credible makes comparing multiple lenders quick and easy — you can see your refinance rates from our partner lenders in the table below in three minutes.
Learn More: How to Refinance Your Mortgage in 6 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.
Cost to refinance
The average refinance loan costs the homeowner about $5,000 in closing costs, according to Freddie Mac. It might seem obvious that a lower interest rate or reduced payments could benefit you, but what’s not so clear is whether the cost of refinancing will result in the savings you hope to achieve. Calculating your breakeven point can help put the costs into perspective.
A breakeven point is the point at which you’ve saved enough on your new monthly payments to recoup the closing costs. To calculate it manually, divide the closing costs by the amount you’ll save each month on your mortgage payments. Or, you can use Credible’s breakeven calculator to easily find out when you’ll start recouping your refinance costs.
Say, for example, you pay $3,000 in closing costs on a $100,000 refinance loan, and your new monthly loan payment is $100 less than your old payment. Here’s what that looks like:
Should you refinance your home again?
There’s no hard-and-fast rule about the 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 a great refinance rate. Comparing multiple rates at once could save you thousands over the course of your loan term — and Credible makes it easy with its streamlined application process.
Aly J. Yale contributed to the reporting for this article.