How Many Times Can You Refinance Your Home?

There’s no official limit on how many times you can refinance your home, fortunately. A mortgage refinance can help you save money on your monthly payments and over the life of the loan. It doesn’t always make financial sense to do so, though. Let’s look at what you need to know before replacing your existing mortgage.

How often can you refinance your home?

While there’s no official limit to the number of times you can get a mortgage refinance, you may have to wait a while between refinances. This mandatory waiting period is known as a “seasoning requirement,” and each loan program has a different timeline in place.

Here’s a look at what to expect:

Reasons to refinance multiple times

There are many good reasons to refinance your mortgage, even if you’ve already been through the process before. Below are some signs that it might be a smart idea.

You can secure a lower interest rate

If mortgage interest rates have dropped substantially since you first took out your home loan, refinancing can help you save money on your monthly payment.

As a rule of thumb, it makes sense to wait until rates have dropped by at least 1 to 2 percentage points to help offset any upfront costs.

You want to change your repayment term

Most people have a 15- or 30-year mortgage repayment term. Changing your loan term can help you alter your monthly payment amount and pay off your loan at a different pace.

Generally, choosing a longer loan term will help you secure lower monthly payments, but it will take you longer to pay your loan in full. Meanwhile, a shorter loan term will likely lead to a higher monthly payment, but you can pay off your loan faster.

You can get rid of mortgage insurance

If you have a conventional loan and made less than a 20% down payment, you’re probably paying for private mortgage insurance (PMI). Refinancing into a new loan can help you get rid of PMI, but your lender may also waive PMI once you’ve built more than 20% home equity. Call your loan servicer to explore the options available to you.

On the other hand, if you have an FHA loan and made less than a 10% down payment, you’re expected to pay an annual mortgage insurance premium (MIP) for the entire loan term. In this case, you’ll need to refinance into a conventional loan to avoid this expense. If you made at least a 10% down payment, you’ll only pay an annual MIP for 11 years.

You need to finance a big expense

Those who need to make a major purchase, such as covering college expenses or medical costs, may want to consider a cash-out refinance.

As the name suggests, a cash-out refinance lets you borrow more money than you currently owe on your home. You’ll receive the cash difference in a lump sum at closing, which you can then use however you’d like.

That said, cash-out refinancing often comes with stricter qualifying requirements, especially around the relationship between your loan amount and home’s value, known as your “loan-to-value (LTV) ratio.” Plus, if you pull equity out, you’ll also pocket less money if you plan to sell your home in the near future.

Factors to consider before refinancing your mortgage again

Even if you have a good reason to refinance your home loan, there are a few downsides to going this route. Here’s an overview of what to consider before you shop around for a loan.

You’ll need to pay closing costs again

Refinancing isn’t free. Each time you take out a new loan, you’re expected to pay a new set of closing costs. Your closing costs will include any fees necessary to originate the new loan.

Freddie Mac estimates that refinancing costs around $5,000, on average. However, every lender’s fee structure is a bit different, and your costs can also vary based on your loan amount and location.

Here are some common refinancing costs that you can expect:

• Origination fee: An origination fee is an administrative fee that some lenders charge in exchange for processing the paperwork necessary to open up a new loan account.
• Appraisal fee: When refinancing, lenders often require a home appraisal to make sure that they have an up-to-date assessment of your home’s value.
• Attorney’s fees: If you live in an attorney state, you may be required to have a real estate attorney review your new loan contract.
• Recording fees: This fee covers the cost of recording your new loan with the appropriate government entity.
• Title search and insurance fees: Lenders also need to know that you’re the only party who has ownership rights to the property. You’ll likely need to pay for a new title search and a new lender’s title insurance policy. Luckily, though, your owner’s title insurance policy will remain intact.

Usually, you’ll have the option to roll your refinance costs into the new loan amount. This is known as a “no-closing-cost refinance.” But while going this route can help you save on upfront costs, keep in mind that it’ll increase your total loan costs and can raise your interest rate and monthly payment.

You’ll have to meet the lender’s qualifying standards

Refinancing involves qualifying for a mortgage all over again. If your credit score has dropped or you’ve taken on quite a bit of debt since you first borrowed your home loan, you could have trouble getting approved.

Tools like LendingTree Spring can help you gain valuable insights on how to improve your score. Plus, our guide to understanding your debt-to-income (DTI) ratio can help you learn how to boost your loan approval odds.

You may face a prepayment penalty

These days, prepayment penalties are fairly uncommon with mortgage loans. However, it’s worth reading the fine print on your loan agreement to see if you could be subject to this charge. If so, you could face an extra fee for paying off your loan early, which can add to the total cost of refinancing.

If your existing mortgage does charge a prepayment penalty, factor it into your break-even point calculation to make sure refinancing is still worth the cost.

Alternatives to refinancing multiple times

If it looks like refinancing your mortgage again isn’t the right choice for you, here are three other options to consider:

• Make biweekly payments. One straightforward way to shave a few years off your repayment term and cut down your interest expense is to make biweekly mortgage payments. Divide your monthly payment amount by two and pay the half payment amount every other week. Over the course of a calendar year, you’ll make one extra full payment — 52 weeks means 26 half-payments, or 13 full payments. Ask your lender to apply those extra payments toward your principal amount only.
• Pay more than you owe. If you have extra room in your budget to afford it, round your monthly payments up to the next $100 or $200 to shrink your mortgage balance. Be sure the amount above your minimum payment is applied to your principal amount and not what’s owed in interest.
• Recast your mortgage. Set aside your next tax refund, bonus, inheritance or another extra chunk of cash to apply for a mortgage recast. The process is simple: You ask your lender to apply a lump sum toward your outstanding principal balance and recalculate your amortization schedule based on the reduced principal balance. You may pay a fee for the process, but you’ll end up with a lower monthly payment without providing a bunch of paperwork or paying for a refinance.

Want to save more money each month? Read our guide on how to lower your mortgage payment.