How many times can you refinance your home?
With today’s low mortgage rates, you might be thinking it’s time to refinance.
But what if you recently bought the home, or already refinanced once? Is it too soon to refinance? Just how often can you refinance your home?
In most cases, you can refinance your mortgage as many times as you want.
But whether or not it’s worth it depends on the cost of refinancing versus the potential savings from your new, lower interest rate.
In this article (Skip to...)
- Waiting periods to refinance
- Refinance options
- Rules for cash-out refinances
- No such thing as refinancing “too early”
- Reasons to refi more than once
- Calculating refinancing costs
- Today’s refinance rates
Refinancing waiting periods: How often you can refinance by loan type
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.
- 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.
If your mortgage is government-backed, you may have to hold off a bit.
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 getting a better deal with a different lender.
Feel free to shop around for a lower rate and switch lenders if you can save money.
Types of mortgage refinance loans available
Just as first-time homebuyers have choices with their loans, homeowners also have a number of refinance options available to them.
Whether you’re refinancing a fixed-rate or adjustable-rate mortgage, lenders offer two main types of mortgage refinances: cash-out refinancing and rate-and-term refinancing.
- Rate-and-term refinancing updates current loan terms, offering borrowers a lower interest rate or a shorter term to pay the loan balance
- Cash-out refinancing also updates loan terms, but gives homeowners a lump sum of cash based on their home equity
Borrowers with government-backed mortgages also have refinance options, but with different sets of rules.
For instance, FHA, VA, and USDA loans all allow Streamline Refinancing, which allows the homeowner to refinance into a lower rate and payment with no credit check, appraisal, or income review.
So if you’re wondering how often you can refinance a mortgage, the type of refinance loan you’re using will affect your eligibility.
Rules for cash-out refinances
Cash-out refinance rules are a little different than rate-and-term refinances.
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. The refinance must also provide you with a net tangible benefit.
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 home loans as a way to leverage their home equity and get the capital they need 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 new cash-out refinance loan amount can’t exceed 80% of your home’s value.
On September 1, 2019, the FHA capped its cash-out loan amounts at 80% of your home’s value.
Mortgage lenders set these limits to ensure you have some equity left in your home after you refinance.
However, the 80% rule isn’t set in stone on conventional loans. Texas is one exception, where there are different cash-out refinance rules.
Many lenders are also willing to let you borrow more than 80% of your home’s value if you pay private mortgage insurance (PMI) or pay a slightly higher interest rate.
VA loans are another 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%.
No such thing as refinancing "too early"
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 30-year loan period over at year one. 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 years||-||$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 the less you save 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 monthly mortgage payments
If you’re looking to lower your monthly payments, refinancing into a longer term extends the length of time you have for loan repayment, but it also can reduce your monthly mortgage payments. Keep in mind that with this refinance option, you may end up paying more in interest over the life of the loan.
Get a lower interest rate
If you took out a loan when rates were higher and you’ve significantly improved your credit score, refinancing to more favorable loan terms could save money.
For instance, a 30-year fixed-rate loan of $500,000 with a 6% interest rate costs roughly $100,388 in interest. However, if that rate dropped to 4%, you’d save about $31,655 over the life of the loan.
Cash out your home equity
If your home value has increased, 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 needed home improvements.
Although, homeowners may want to consider loan options such as a home equity loan or a home equity line of credit (HELOC) to avoid closing costs on a new loan.
Get a shorter term on your loan
Another common reason to refinance is to shorten the loan repayment period — and maybe get a lower interest rate while you’re at it.
Using our previous example, if you reduced the terms to a 20-year repayment period and a 4% interest rate, then you would cut 10 years and $34,570 in interest from that $500,000 mortgage loan.
Calculating the costs of refinancing again
If refinancing your current mortgage can get you lower monthly payments and allows you to pay your loan balance faster, then it probably makes financial sense for most borrowers.
Using a refinance calculator can help determine if underwriting 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 takes 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 you can refinance as often as you like — as long as you’re meeting your personal financial goals.
In the mortgage industry, there’s no rule that says you’re only allowed to refinance once.
Today's refi rates
Mortgage and refinance rates keep hitting new record lows.
If rates are significantly lower than when you closed your home loan, consider a refinance.
Even if you just closed or refinanced once, you’re allowed to act on a lower rate and save on your mortgage.