How Often Can You Refinance Your Home?
You can refinance as often as you wish, as long as you’re getting some financial benefit. However, there are limits to how many times you can refinance each year depending on the loan program, whether you’re tapping equity or not and your breakeven point.
Knowing the rules about how often you can refinance your home may save you time and money in both the short term and the long run.
How many times can you refinance your home?
Lenders typically let you refinance as frequently as you want as long as the new loan improves your finances or your home. In fact, many states require lenders to complete a “tangible net benefit worksheet” to prove the refinance is in your best interest.
There may also be restrictions based on the refinance loan program you choose, the reason for the refinance and how recently you purchased the home being refinanced.
How often you can refinance government-backed loans
If you currently have a loan backed by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA), lenders will need information about how recently you closed on the mortgage you’re refinancing.
The date is used to determine whether you meet the “seasoning requirement,” which is the number of payments made since you took out your current FHA, VA or USDA loan. These programs also set strict limitations on your breakeven point – which is how long it takes for you to recoup your refinance closing costs.
The table below shows the minimum waiting periods and breakeven requirements for three popular government “streamline” refinance programs: the FHA cash-out refinance, the VA interest rate reduction refinance (IRRRL) and the USDA streamlined assist refinance.
|USDA streamlined assist
Cash-out refinance limitations
If you’re borrowing more than you currently owe to pocket some extra cash from your home equity, lenders apply additional seasoning requirements if you’ve recently purchased your home. Loan programs typically require that you wait six months after your closing before you can tap your equity.
There is one exception if you paid cash for your home: Conventional lenders offer a “delayed refinance” option that allows you to recoup cash spent for an all-cash purchase, as long as you complete the refinance within six months of the home. The only catch: All of the money from the refinance must be used to replenish whatever cash account you used to buy the home.
Check out the waiting period for each cash-out program below:
|Cash-out refinance program
|Cash-out seasoning period since purchase
|Regular conventional cash-out refinance
|Conventional delayed cash-out refinance
|Must be completed within 6 months of purchase
|FHA cash-out refinance
|6 monthly payments
|VA cash-out refinance
|6 monthly payments
How often should you refinance your home?
While there’s no golden rule for how many times you should refinance your house, your breakeven point will at least tell you if you’re losing money each time you refinance. You can calculate your breakeven by dividing your total closing costs by your expected monthly savings. For example, if you spend $4,000 on closing costs to save $100 per month, then your breakeven is 40 months.
If you refinance before making 50 payments, you’ll effectively lose money on the refinance. In the example above, let’s assume you refinance again after 24 months. You’ll only have recouped $2,400 of the $4,000 you paid in costs (24 months x $100/month savings), leaving you with $1,600 that you won’t recover.
In general, you should refinance your home if:
- You can get a lower interest rate and payment
- You can use the monthly savings to pay your loan off faster
- You need to tap equity to cover major expenses like college education
- You want to fix up your home
- You can accomplish other financial goals with the payment savings, such as beefing up an emergency fund or increasing your retirement account contribution
Is it bad to refinance your home multiple times?
There are dangers to refinancing over and over that you should consider.
You may extend how long it takes to pay your loan off. If you refinance your current mortgage to a new 30-year term, you’re basically starting the clock over on how long it takes to pay your loan off. Consider applying your monthly savings to your principal each month to offset the extra years you’re adding with another 30-year loan.
You won’t make as much profit if you tap equity. Any equity you borrow against now means less in your pocket when you sell your home. Keep that in mind especially if you want to list your home for sale in the near future.
You could lose your home if your mortgage is unaffordable. Refinancing to a short term or taking cash out may seem like a good idea at first — but it could end up saddling you with a high payment you can’t afford, ultimately leading to foreclosure.
Alternatives to refinancing more than once
Refinancing costs can be expensive both upfront and over time. Some homeowners may find it worth it to refinance more than once within a short time period, while others will find it prohibitively expensive.
If you’re in the latter group, consider one or more of the following ways to cut down on your mortgage costs:
- 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 it recalculates your amortization schedule based on the reduced principal balance. You may pay a small fee for the process, but you’ll end up with a lower monthly payment without providing all the paperwork or paying the costs of a regular refinance.