How often can you refinance?

Refinancing a mortgage allows you to pay off an existing debt on a home with a new loan with different terms and features. The short answer to the question of how frequently you can refinance your mortgage is simple: You can refinance as often as lenders are willing to approve a new loan based on their guidelines.

It is not always advisable or beneficial to refinance numerous times as each time the fees might end up outweighing the benefits if done too often. So before making the decision to refinance, weigh all factors carefully, as they could cost you.

A loanDepot licensed loan officer can help answer your questions regarding a refinance. Call today for more information.

What is the goal of the refinance?

Lives and the economy change dramatically over the course of 30 years and what you need from your mortgage now might be very different than it was when you first purchased your home or last had it refinanced. When deciding if you should refinance, be clear on why you want to do so. Depending on the circumstances, the reasons to refinance can include:

  • A lower interest rate which can result in the loan being less expensive on a monthly basis
  • Modified terms, which will allow you to shorten or extend the amount of time to repay the loan
  • Reducing your monthly mortgage payments with a lower interest rate or longer terms to increase cash flow
  • Fast access to cash, which you can use to pay down debt, remodel, or use for other needs
  • Switch from an adjustable-rate mortgage to a fixed, or vice-versa

Current mortgage interest rate trends, credit qualifications, and the home's current value play a crucial role in your ability to qualify, of course. Appraisals and closing costs will add to the amount of your loan, so again, consider these to make an informed decision.

Change in terms

Shortening or lengthening the length of your loan might be advantageous at this time. Perhaps when you bought your home, you were doing well financially and opted for a 15-year-fixed loan so you could pay your house off as quickly as possible. But now you’ve experienced an illness in the family or other unforeseen circumstances and you need to refinance to a 30-year ARM in order to get relief on your monthly bills.

Access cash

Cash-out refinance loans are beneficial when a homeowner has equity in their property and needs to access the funds. You can use the money for many reasons including remodeling, consolidating debt, a down payment on a second home, college, etc. This should be a strong ‘pro’ because chances are the interest you would pay on your cash-out refinance or home equity loan will be a lower interest rate than credit cards, cash advances or other means of accessing cash.

Lower your interest rate

A look back to interest rates from 10 years ago and it is clear that they have fallen significantly. In some cases, rates on refinanced mortgages remain at historically low levels. This can provide a significant amount of savings to homeowners, giving them a good reason to refinance. If you refinance into a lower-rate loan, one that is two or more percentage points less, you could save significant money on monthly payments and reduce the overall cost to payoff your mortgage.

Short- vs. long-term benefits

Before making the decision to refinance, work closely with a lender to determine the affordability of a new loan. Since credit scores, home values, and other customized data need to be considered before the financial benefit of refinancing can be calculated, a personalized quote is best. It is important to get an estimate of the closing costs. Knowing these numbers can be key to deciding the overall benefit of your refinance.

The good news is current interest rates are historically low, providing homeowners with an incredible opportunity to secure a low-cost mortgage refinance. Additionally, if you just want to pull cash out for home renovations, you can do so. Home values are on the rise, pushing home equity higher and giving you more power and ability to refinance.

To find out if now is the right time for you to refinance, contact a loanDepot licensed loan officer to discuss the financial options available to you. Call now for more information.

Published February 25, 2016


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