How Many Times Can You Refinance a Mortgage? – 5 FAQs about Refinancing
As you are probably already aware, it does not always make sense to stick with the mortgage that you initially took on when you bought your home. Mortgages are usually 15 or 30-year agreements, and a lot can happen during the many years that have passed since you took out your mortgage.
In fact, you may have already refinanced your mortgage one or more times. The last time you refinanced, you may have realized that things had changed for you. For example, interest rates had gone down, you needed to cash out some of the equity in your home, or maybe you wanted to change the repayment period for your mortgage. So, you refinanced.
Now, looking at things again, you may find that it could make good financial sense to refinance your loan again. If you are considering refinancing your mortgage again, here are 5 answers to frequently-asked-questions about refinancing:
1. How soon after closing a mortgage can I refinance?
The answer to this depends upon your lender. Some mortgage lenders offer loan terms that do not specify any minimum time requirement for a refinance. Others do. In the latter case, this is known as a seasoning requirement. But, even if your current lender has such a seasoning requirement in place, if more than a year has gone by since you signed your mortgage, you should be able to refinance now with no problem.
2. How many times can you refinance a mortgage?
From a legal perspective, there is no limit to the number of times you can refinance. The only potential barriers to doing so multiple times would be, for example, if you were to run out of home equity during the refinance process. If that is the case, you may need to wait a bit longer before refinancing again.
3. What are the benefits of refinancing?
Refinancing can lead to lower monthly payments, lower total cost of the loan, and the ability to cash out equity in your home. The equity can be used to pay off higher-interest debt, engage in home remodeling, or to pay other expenses. Refinancing usually involves some closing costs, so each time you refinance you may face a short-term loss. However, if you can secure for yourself a lower interest rate, need to pay off some high-interest debt, or plan to stay in your home for at least another few years, it may very well make sense to do so now.
4. Can I eliminate PMI by refinancing?
Yes, you can potentially eliminate PMI by refinancing. The two conditions you would need to meet are:
- If you have made your mortgage payments on-time every month for a year
- You have at least 20% equity in your home – through either home appreciation or your having paid down your mortgage
5. Should I refinance even if there would only be a small change in my interest rate?
In this case, you should be planning to stay in the home for a few years to make a refinance worthwhile. However, even if you get the same interest rate with your refinance, it still may be worth it to refinance because you could roll in higher-interest debt or have an interest-only option.
Consider the answers to these 5 FAQs about refinancing your home.
