How Often Can You Refinance?
Learn How Many Times Refinancing Your Home Makes Sense
In theory, you can refinance your home as often as you can get a lender to approve a new loan. In practice, you should only refinance when it makes financial sense and is worth your time. Each refinancing typically incurs closing costs, so it's essential to ensure that these costs are justified by obtaining a better rate or improved terms. While there is generally no limit on the frequency of refinancing, the key is to refinance only when it is financially advantageous for you.
How Does Your Break-Even Point Affect How Often You Can Refinance?
Your "break-even" point is the moment when the savings from refinancing equal the closing costs incurred. For example, if refinancing saves you $100 a month on your mortgage and the closing costs amount to $1,500, you would "break even" after 15 months and begin saving money starting at 16 months. Refinancing before reaching the 15-month mark would result in a financial loss. Additionally, the longer you save that $100 monthly, the more you will accumulate over time.
Keep in mind that refinancing can lead to higher total finance charges over the life of the loan. Evaluating your break-even point can help you determine whether refinancing makes sense for your financial situation.
How Does Net Tangible Benefit Affect How Often You Can Refinance?
A net tangible benefit is a refinance requirement used by lenders, such as Freedom Mortgage, to ensure that refinancing is beneficial to you. This means you must receive a substantial advantage from refinancing, such as a significant reduction in your interest rate or monthly payment. If you meet these criteria and your lender’s credit, income, and financial standards, you are free to refinance your home as often as you like.
How Does Seasoning Affect How Often You Can Refinance?
Seasoning refers to the minimum period you must wait before refinancing your loan. Demonstrating consistent payments during this seasoning period assures lenders that refinancing will be beneficial. Seasoning requirements vary by loan type, so let’s explore how they apply to different types of loans.
How Often Can You Refinance a Conventional Mortgage?
Typically, you need to wait six months before refinancing a Conventional loan. In some states, the waiting period may extend beyond six months. For Conventional cash-out refinances, the seasoning period is 12 months from the initial purchase. As with any refinance, it’s crucial to weigh the benefits against the closing costs to determine if refinancing is a good choice. There are no limits on how many times you can refinance a Conventional loan as long as you meet the requirements and demonstrate a net tangible benefit.
How Often Can You Refinance an FHA Loan?
There are no limitations on how often you can refinance with an FHA loan. FHA loans also offer a streamline program that requires borrowers to have made at least six payments on the loan being refinanced, with at least six months passing since the first payment due date and 210 days since the closing date of the mortgage being refinanced.
For FHA cash-out refinances, there is a seasoning period of 12 months from the initial purchase. To qualify for FHA refinancing, you must be current on your mortgage payments, have a recent history of timely payments, and receive a tangible benefit from refinancing.