Home refinancing is a serious undertaking and can help you in several ways. If you regularly struggle to make monthly mortgage payments or find a better opportunity to refinance your home, you can consider home refinancing loans again.
A common question that arises is how often you can refinance your home. The simple answer is you can refinance a home as many times as you want, but it comes with a catch. If you are not careful about home refinancing, it could cost you more than you expect.
That’s why we put together this guide on home refinancing loans and help you decide how often to refinance.
How Many Times can you Refinance your home?
As such, there is no legal limit on how many times you can refinance a home loan. But it doesn’t mean that you will get the approval from best mortgage lenders every time. There are some prerequisites depending on the mortgage lender you choose. And if you are looking for cash-out refinance, you must fulfill some special requirements.
There’s a “seasoning” requirement for most lenders, which is simply a waiting period of six months before you refinance your home loan. However, the waiting period might only be application if you are applying with your current lender. Also, first-time home buyer loans have no such requirement. But the best mortgage lenders can decide to let go of this requirement. In the case of cash-out refinance, the waiting period is usually firmly implemented.
However, these requirements are for private money lenders; if you want to refinance your home through government-insured mortgages, you have to fulfill these requirements:
FHA streamline refinance
If you already have an FHA loan and want to do an FHA streamline refinance, you must wait 210 days from the closing date of your first mortgage. This is required before you’re able to refinance your home loan.
FHA cash-out refinance
If you take cash out during an FHA refinance, you have the six-months-from-their-first-payment requirement.
VA streamline refinance
Borrowers with a VA loan can consider the VA streamline refinance, also known as an Interest Rate Reduction Refinance Loan, or IRL. If you apply for VA streamline refinance, you must wait either 210 days from the date of your first mortgage payment or the date when the sixth mortgage payment is made successfully, whichever is later.
VA cash-out refinance
If you are taking cash out during a VA loan refinance, you must wait for 210 days from the first mortgage’s closing date.
These are the fundamental requirements you must consider when applying for home refinancing loans. While it is true that you refinance your home as often as you want, you must only do it if it makes financial sense. If the new interest rate is not significantly better than the one you have right now, avoid refinancing. When you factor in the cost of the refinance, you might not save anything.
Understand the cost of home refinancing multiple times
As mentioned, refinancing a groundup construction loans or your home loan won’t always make financial sense. Just because a lower interest rate is available or your credit goes up doesn’t mean it is time to refinance the loan. Like first-time home buyer loans, refinancing also has closing costs.
Each time you apply for home refinancing loans, there are fees you should pay, such as the application, attorney, appraisal, credit check, title search, etc. The actual cost will depend on where you live and the lender you choose, but usually, you pay around 2 percent to 5 percent of the loan principal as refinance closing fee.
Before you take a leap and apply for home refinancing loans, consider whether you want to live in the house long-term or not. If you plan to say for long, it makes financial sense to refinance your home loan. However, you must still consider the closing costs and how they influence the break-even point.
You’ll have to qualify again for the loan
The best mortgage lenders will again consider your credit and financial profile to approve the loan. If your credit has changed negatively since you last applied for a refinance or mortgage, it can result in the decline of your application. Additionally, bad credit can also lower the interest rate savings you might get.
Not common, but there are some scenarios where you can end up paying a prepayment penalty if you settle the loan before the term is up. This will be an addition to the refinancing cost. That’s why you should read the fine price of your load to see if there are charges for closing the mortgage before its term.
Home refinancing loans can be great for bringing down your monthly EMIs, but you should consider the factors shared in this blog before deciding. Always go with the best mortgage lenders who offer better-interest loans and are approved by the government.