Is it bad to refinance your home multiple times? How soon after refinancing can you refinance again? Can you refinance immediately after buying a home? When should you not refinance your mortgage? All great questions that we'll answer here so that you can maximize your savings!
What Is Refinancing?
When you refinance a mortgage, you trade in your old mortgage for a new one. What's the benefit of doing so? Many times, a borrower can secure a lower interest rate thanks to changes in the market, can reduce monthly installments by opting for a longer term, or can cash out a portion of their equity.
With the potential to save some serious money or get much-needed cash, it's easy to see the appeal of refinancing a mortgage. Let's delve a little deeper to get a full refinancing picture.
How Soon Can You Refinance After Purchasing Your Home?
Let's say you just purchased your dream home, only to find that interest rates have dropped. That's no surprise, as rates are currently at historic lows. As a homeowner, you want to take advantage of these falling rates, which begs the question: how soon can you refinance after closing?
In many cases, right away! What it will come down to, is the type of mortgage you currently have and the type you want to have. It's important to note that many lenders have a waiting period before a current borrower can refinance with them, and while that length of time varies, it's typically around six months.
The good news is that nothing is stopping you from shopping around for another lender and refinancing with them! If you want to use the same lender, be sure to ask about your refinancing options well before closing on your home.
Tip: Make sure there is no prepayment penalty fee on your current mortgage!
Most conventional loans can be refinanced right away. If you're interested in a cash-out refi or have a government-backed mortgage, like a VA or FHA loan, there may be a set waiting period. Your lender will be able to answer specific refinancing questions based on the loan you have and what you're hoping to accomplish by refinancing.
A VA loan refi is special. Read Hello, My Name Is IRRRL
How Soon After Refinancing Can You Refinance Again?
This is a similar situation to wanting to refinance after closing on a home. Depending on the type of loan you have and what your refinancing goals are, you may be able to do so right away.
Just remember: you may have to choose another lender if your current one has a waiting period that you want to bypass.
Is There a Limit to How Many Times a Homeowner Can Refinance?
Nope! You can refinance your mortgage whenever it makes financial sense to do so. Lenders do have rules that dictate the frequency of refinancing based on the loan type, but homeowners can get around that by working with a competing lender.
Interested in refinancing your mortgage for the first time? There is nothing more important than comparing your options. Do so right now, with no obligations to refinance!
Is It Bad to Refinance a Home Multiple Times?
While refinancing offers many benefits, it isn't without downsides. As long as you're meeting your financial goals, it isn't bad to refinance your home multiple times. There are some things to keep in mind, however. Refinancing:
- Comes with closing costs, and those costs can quickly add up if you're refinancing multiple times a year
- Can lower your credit score, as you'll be dealing with hard credit pulls
- Still has lender requirements, like a certain debt-to-income ratio and credit score
- May mean you're faced with prepayment penalties
- Could introduce an owner-occupancy clause that requires you to live in the house for a certain period of time after refinancing
That's why the decision to refinance shouldn't be taken lightly. Understand all costs and impacts of refinancing before making any decisions.
When Should You NOT Refinance?
There are, of course, situations in which it simply doesn't make sense to refinance. Those include:
- If you plan to sell the home before you'll break even
- Having lower monthly payments but significantly higher long-term costs than your original mortgage
- High closing costs
As well as not being able to secure low enough rates for the move to make sense financially. Everyone has their reasons for refinancing or choosing not to. To make the best decision for you, be sure to thoroughly review all documents and clauses, understand all associated fees, and have a firm grasp of how refinancing will affect your bottom line.
Does Refinancing Make Sense for You?
Don't make any decisions until you've compared rates. You can easily do so with help from Lendgo, a free online platform that connects borrowers with reputable lenders who want to work with them.
Compare refinancing rates from the comfort of your home, and see how much you can save over the life of your mortgage by refinancing!