How often can you refinance?
You can refinance your home as many times as you want. Or at least, as many times as it makes financial sense to do so — keeping in mind that you’ll typically extend the loan term and pay closing costs on each refinance loan.
Some lenders and loan types enforce a six-month waiting period before you can refinance. But in some cases, you can get around those rules by refinancing with a different lender. So if you’re ready to refinance but your current lender says no, ask a few other lenders about your options.
In this article (Skip to...)
- About refinancing
- Waiting periods
- Cash-out refinances
- How soon to refinance
- Reasons to refinance
- Closing costs
- Today’s rates
You can refinance as often as it makes financial sense
Refinancing should typically lower your interest rate and reduce your monthly mortgage payments. With that in mind, it might make sense to refinance multiple times throughout the life of your loan. Each refinance could drop your rate further, potentially saving you thousands of dollars in interest payments.
Many lenders enforce a six-month waiting period between your last mortgage and when you can refinance. But if you have a conventional loan, and you’re not taking cash out, you may be able to refinance sooner simply by using a different lender.
It might make sense to refinance multiple times if:
- You can lower your interest rate and/or monthly mortgage payment
- You’ll save more in the long run than you spend on refinance closing costs
- Resetting your loan term won’t increase your overall interest cost
- You can pay off your home sooner
In short, you can refinance as many times as you want, as long as there’s a clear financial benefit each time.
How long after refinancing do you have to wait before refinancing again?
There’s no limit on how often you can refinance your mortgage. However, there are waiting periods that will dictate how soon you can refinance after refinancing or buying a home. And you’ll have to figure out whether it makes financial sense to refinance more than once.
Rules about how often you can refinance your home vary depending on the type of loan you have. They also differ for rate-and-term refinances vs. cash-out refinances.
Waiting periods to refinance:
- Conventional loan: No waiting period to refinance
- Government-backed loan: Six-month waiting period to refinance
- Cash-out refinance: Six-month waiting period to refinance
- Some lenders enforce a six-month waiting period regardless of the type of loan
Many conventional mortgages do not require a waiting period to refinance. You might be eligible to refi immediately after closing on the loan. But if your mortgage is government-backed, you may have to wait. For example, the FHA Streamline Refinance and VA Streamline Refinance programs require you to wait at least six months after closing your existing mortgage before you can refi.
Many lenders also have “seasoning” requirements. Oftentimes you’ll have to wait at least six months before refinancing with the same lender. However, a seasoning requirement doesn’t stop you from refinancing with a different lender. You’re free to shop around for a lower rate and switch lenders if you can save money.
Rules for cash-out refinances
If you want to cash out home equity when you refinance, there are different rules about how long you must wait and how often you can refi. Most lenders make you wait a minimum of six months after the closing date before you can take cash out on a conventional mortgage.
If you have a VA loan, you must have made a minimum of six consecutive payments before you can apply for a cash-out refinance.
Cash-out refinances require a six-month waiting period. You also have to build up enough equity in the home to qualify for a cash-out loan, which takes time.
Many homeowners use cash-out loans as a way to leverage their home equity for renovations or home improvements using a new, low-interest mortgage. Some homeowners use the money to consolidate debt, while others might use the loan proceeds to strengthen their investment portfolios or help pay for a child’s education.
Whatever plans you have for the money, you have to figure out how the new mortgage will affect your financial situation. You’ll also need enough home equity to qualify for a cash-out refinance.
Minimum equity requirements for cash-out refinancing
On most conventional mortgages, your cash-out refinance loan amount can’t exceed 80% of your home’s value. That means you must have more than 20% home equity in order to cash out while leaving that portion of the home’s value untouched. The same is true for FHA cash-out refinance loans.
VA loans are an exception to the rule. They allow cash-out loans up to 100% of the home’s value, although many lenders cap loan-to-value at 90 percent.
In any case, unless you put down 20% or more when you bought the home, it takes time to build up that much equity. This limits the number of times you can use a cash-out refinance over the life of your mortgage, since you must have sufficient home equity to borrow against each time.
How soon should you refinance your home?
You can’t refinance your mortgage loan too early — or too often — if you’re saving money. In fact, it’s often better to refi earlier in your loan term rather than later.
That’s because a refinance starts your loan over, typically with a new 30-year term. In many cases, the longer you wait to refinance with a new loan, the longer you’ll end up paying interest — and the more you’ll ultimately pay over the life of the loan.
Take a look at one example:
|Original Loan||Refinance After 1 Yr||Refinance After 3 Yrs|
|Interest Savings Over 30 Yrs||-||$32,200||$18,371|
Let’s assume your original loan amount is $200,000 with a 4.7% interest rate. Your monthly mortgage payments would be $1,037. After one year, the remaining balance on your loan would equal $196,886.
If you refinance after year one into a 3.7% rate, you’ll save $32,200 in interest over the remaining 30 years of your loan.
If you choose to refinance after three years, your loan balance would equal $190,203. Refinancing into a 3.7% rate at this time would only save you $18,371 in interest repayments on a 30-year mortgage
So, why are you saving more when the loan amount after three years is almost $7,000 lower? Every time you refinance, you reset your loan for another 30 years. The longer you wait to refinance, the more time it takes to pay off your mortgage, which means you save less in interest payments.
Reasons to refinance more than once
Whether you’re refinancing for your first time or fifth time, here’s how to tell if a new loan is right for your financial situation.
Lower your interest rate
The most common reason to refinance multiple times is for a lower interest rate.
If you took out a loan when rates were higher — or if you’ve improved your credit score since you bought the home — you may be able to lower your mortgage rate. This will decrease your monthly payments and can potentially save you tens of thousands of dollars over the life of the loan.
For instance, a 30-year fixed-rate loan of $300,000 with a 6% interest rate costs roughly $347,500 in interest over the life of the loan. However, if you refinance to a 4% rate, the total interest cost drops to around $215,000. Depending on how far you are into the loan when you refinance, you could save over $100,000 over 30 years.
Lower your monthly mortgage payments
Even if you can’t lower your interest rate, refinancing can still lower your monthly mortgage payments. That’s because a new loan extends your repayment term and gives you more time to pay off the remaining loan balance. This can be helpful if you’re in a financially tight spot and need to save money, but can’t drop your rate because interest rates are now higher.
Just keep in mind that extending your loan term without decreasing your rate will likely increase the amount of interest you pay in total over the life of the loan. So this can be a risky strategy.
Cash out your home equity
A cash-out refinance allows you to access the equity you have in your home. Some borrowers use the lump sum of cash to pay down high-interest debt, like credit card debt, or to make home improvements. If you can lower your interest rate at the same time you access your home’s value, this type of loan can be especially beneficial.
Homeowners who cannot refinance to a lower interest rate might want to consider alternatives like a home equity loan or home equity line of credit (HELOC) instead of a cash-out refi.
Get a shorter term on your loan
If you’ve been paying off your original home loan for many years, it might make sense to refinance into a shorter loan term, like a 15- or 20-year mortgage. Shorter loan terms typically have lower interest rates than 30-year mortgages. And you’re reducing the number of years you’ll pay interest on the loan. So this strategy can lead to huge savings in the long term.
Just keep in mind that a shorter-term mortgage will have higher monthly payments because you’re paying off the same loan amount in less time.
How to factor in refinance closing costs
If refinancing your current mortgage can get you lower monthly payments and allows you to pay off your loan balance faster, then it probably makes financial sense. Using a refinance calculator can help determine if taking out a new loan is right for your financial situation.
However, everyone’s personal finances are different. A general rule of thumb is to calculate how long it will take to break even on your closing costs and start seeing real savings.
You’ll pay around 2-5% on average of your loan amount in closing costs. You can use these costs along with what you’re saving in payments to calculate how many months it will take to recoup the money and break even.
- Let’s say you pay $5,000 (2%) in closing costs on a $350,000 mortgage refinance
- You lower your monthly mortgage payment by $225
- To find your break-even point, you divide your total closing costs ($5,000) by how much you reduced your monthly payment ($225)
- $5,000 / $225 = 22.2
- It will take you approximately 22 months to recoup your closing costs and “start” saving money
If you don’t plan on moving during those 22 months, it’s probably the right choice to refinance. Any break-even below 24 months is generally considered a good benchmark.
The bottom line is that you can refinance as often as you like as long as it meets your personal financial goals. There’s no rule that says you’re only allowed to refinance once.
Today’s refi rates
Today’s refinance rates have risen from the all-time lows seen during the pandemic. But there are still good reasons to refinance. If you want to cash out equity, shorten your loan term, or remove mortgage insurance, a refinance could be the right move.
Even if you recently bought your home or refinanced, it might not be too soon to consider refinancing again. Check with a lender to run the numbers for your situation and see if a refi is worth it for you.