How often can you really refinance your mortgage?
You were convinced that refinancing your mortgage was the right thing to do 鈥斅爐he first time. Maybe you鈥檝e even refinanced since then. And still, in your situation and with rates where they are, you鈥檙e tempted to refinance yet again.
How many times can you refinance your home loan? Can you really get too much of a good thing?
A refinance requires reasoning, and sometimes seasoning
There are a lot of reasons to refinance your mortgage. Perhaps to get a better interest rate or to change the term (length) of your loan, or convert an adjustable-rate loan to a fixed-rate. Or you may want a cash-out refinance, borrowing against the built-up value of your home to pay for remodeling or other things.
And the fact is, you can refinance as often as you want, but some lenders look for a 鈥渟easoning鈥� period between home loans 鈥斅爀stablishing a certain time frame between appraisals.
鈥淭here are no standard seasoning requirements for rate and term refinances, although some lenders may require that,鈥� says Ray Rodriguez, a regional mortgage sales manager for TD Bank in New York City. 鈥淭he industry standard for a cash-out refinance is six months.鈥�
A penalty for an early payoff on your current mortgage might be the only other barrier to refinancing. However, Rodriguez says recent regulations 鈥渉ighly discourage鈥� banks or mortgage lenders from offering mortgages with prepayment penalties.
鈥淎 homeowner can as many times as they would like, but they should establish objectives and find a product that meets their unique financial situation,鈥� Rodriguez tells NerdWallet. 鈥淔or example, a shorter term loan will have a lower interest rate than a 30-year fixed-rate loan, but the payment will be higher because you鈥檙e paying it off faster.鈥�
It鈥檚 simply a matter of to see if it鈥檚 right for you, no matter how many times you鈥檝e refinanced before.
This couple refinanced their home twice in one year
Holly and Greg Johnson, who live in central Indiana, refinanced their home twice in one year. How does that work?
鈥淲e originally refinanced a 30-year mortgage from 6.5% to 5.25% because the savings was going to be worth the out-of-pocket fees,鈥� Holly Johnson tells NerdWallet. 鈥淭hen we refinanced again to a 15-year loan at 3.25% once rates got that low. We did a fee-free refinance that time, so we didn鈥檛 pay any closing costs. If I remember correctly, we could have gotten a 2.75% 15-year-loan, but we chose 3.25% to get our closing costs waived. Once again, the savings was there if we went through with it, so it was definitely worth it.鈥�
Like many young couples, the Johnsons bought their home with a small down payment. Having less than 20% equity (the amount聽they鈥檇 paid vs. the loan amount)聽meant they had to pay聽private mortgage insurance, which聽protects the lender from loss.
With the lower interest rate and shorter loan term from the first refinance聽鈥斅燾ombined with making additional payments toward the principal 鈥斅爐he couple quickly achieved more than 20% equity. By the time they refinanced again, the Johnsons were able to remove the private mortgage insurance requirement, netting them an additional $135 savings per month.
Not just 2 refinances 鈥斅�4
But that鈥檚 not all.
鈥淚n addition to refinancing our primary home, we also refinanced our rental properties once each,鈥� Johnson聽adds.
Sounds like a lot of work.
鈥淚 wouldn鈥檛 say any of our refinances were especially difficult, because we had the equity and the numbers made sense every time. We鈥檙e also organized, so gathering the required paperwork was never a huge hassle,鈥� she says.
That鈥檚 the key: The numbers have to make sense. And you鈥檝e got to be prepared for the paperwork. Obviously, the Johnsons know a thing or two about refinancing. Do聽they聽see another refinance round in their future?
鈥淲e owe very little on our home now and don鈥檛 plan to move, ever,鈥� Holly Johnson聽says. 鈥淚 can鈥檛 imagine refinancing again now considering the fact that this is the home we鈥檒l live in forever. We have around 10聽years left on this loan if we make the minimum payment 鈥斅燼nd a lot less if we continue to prepay slightly every month. Rates would have to go extremely low 鈥斅爈ike 2% 鈥斅爐o convince me to refinance again, considering what a good position we鈥檙e in already.鈥�
Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: . This article first appeared at .
