How Often Can You Refinance Your Home?

You can refinance your home multiple times for multiple reasons. Maybe you want to capitalize on a lower interest rate or switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan. Some of us may decide to refi to help us get through a difficult financial situation.

While it may be in your best interest to refinance, you should always weigh the costs and benefits of refinancing multiple times.

How Many Times Can You Refinance a Mortgage?

There are no rules limiting how many times you can refinance a mortgage, but many lenders set a 6-month waiting period (aka seasoning requirement) before refinancing.

The number of times you can refinance your mortgage depends on whether you qualify for a refi and your mortgage has a waiting period. 

If you’re wondering how soon you can refinance after closing on a loan, the answer is usually 6 months. But some lenders impose longer wait times. 

Aside from the waiting period requirement, there are other criteria you’ll need to meet, like having at least 20% equity in your home. 

If you qualify for a refinance, consider the costs because they can be significant.

Reasons You Should Refinance Your Home Loan

Everyone has reasons for refinancing their home a second, third or even fifth time. Some of the most common reasons include:

Getting a lower interest rate

Mortgage rates are always changing. If you took out a 30-year mortgage, there’s a possibility that rates will decrease from the time you took out your loan. For many people, getting a lower interest rate on their mortgage is the number one reason to refinance.

Saving on interest charges

Switching to a shorter-term mortgage can reduce the total interest you pay over the life of the loan. For example, if you compare a 30-year fixed-rate mortgage and a 15-year fixed-rate mortgage with the same interest rate, you’d pay half the total interest with the 15-year mortgage.

Reducing your monthly mortgage payments

Refinancing to lock in a lower interest rate or extend your loan repayment period can lower your monthly mortgage payment. A refi can help increase your monthly cash flow by decreasing the size of your monthly payment.

Paying off the loan faster

Refinancing to a shorter loan term could make sense for borrowers who want to pay off their loans faster. It will certainly get you closer to the finish line. And because shorter-term loans can have lower interest rates, you’ll pay less interest.

If you go this route and refi to pay off your loan faster, you should still factor closing costs into your decision to make sure refinancing is worthwhile.

Tapping into equity with a cash-out refinance

With a cash-out refi, homeowners can get a lump sum of cash in exchange for a portion of the equity in their home. 

How To Calculate the Cost of a Refinance

If you qualify for the new mortgage, you can refinance your home whenever you think it makes financial sense.

For this example, let’s say you want to refinance from a 15-year mortgage to a 30-year mortgage in order to lower your monthly payments. 

Before refinancing, you’d want to figure out the costs to refinance, including how much interest you’d pay every month and over the life of the loan and your new monthly payment. 

Find the breakeven point

If you’re refinancing and aren’t holding on to the loan long enough to break even on the closing costs – you’re refinancing too often.

So how do you know when you’ll break even? To figure that out, you have to do some math. Let’s work on a fictional mortgage with a 5.5% interest rate and a $1,634 monthly mortgage payment.

• Your refi has the same term length as your existing mortgage, but the interest rate is 4%, and the closing costs for the refi total $6,000.
• Your new monthly payment will be $1,479 (based on the lower interest rate).
• To calculate your breakeven point, subtract $1,479 from $1,634, which equals $155.
• Every month, you’ll pay $155 less than your previous mortgage, but you must account for the $6,000 closing costs.
• Divide your closing costs ($6,000) by your $155 in monthly savings, and you’ll get 38.7 (just under 3 years and 3 months), which is how long it will take to break even. After that point, the potential savings begin.

What To Consider Before You Refinance Again

Before you refinance, carefully consider the financial implications and make sure you meet the lender’s refi requirements.

Paying closing costs – again

Every time you refinance, you pay closing costs, which are usually 2% – 5% of the loan amount.

To avoid the upfront expense of closing costs, consider a no-closing-cost refinance. A no-closing-cost refi gives you the option to fold the closing costs into the loan or waive them in exchange for a higher interest rate.