How Often can You Refinance?
Refinancing of your mortgage has quite a few benefits but as a homeowner you may not be sure how often can you refinance. Given an opportunity, is it worth opting for refinancing!
Well, you may choose to refinance anytime and any number of times as there is no prescribed limit for how often one can go for refinancing but the issue is will it be worthwhile for the homeowner. Perhaps, getting refinanced all too often is neither helpful nor desirable in most cases.
Usually, any lending institution will be keen to refinance your loan, irrespective of your financial circumstances as it makes money due closing expenses coupled with your borrowings.
Restrictions are generally imposed when you want to get your mortgage refinanced from an individual lender. For instance, one lender may insist on your having the home for a minimum period of one year before offering to refinance you, while another may ask you to have some specified amount of equity accumulated against your home, say ten percent, before refinancing your mortgage.
So, it is not a matter of how often can you refinance, but when it will be helpful for you to opt for refinancing.
A Critical decision
Though you get the option of refinancing almost anytime you want, you have to assess how beneficial it will be for you at any given time. Though refinancing is not difficult, it is a big responsibility. Moreover, the procedure for refinancing is quite like getting your initial mortgage.
It means that on opting to get your loan refinanced, you are going to spend the same amount of cash as you would have done at the time of initial mortgage. So, you have to assess if the expenses to be incurred for refinancing will justify your decision and prove helpful in the long run.
Most experts are of the opinion that refinancing of your mortgage is worthwhile when the rate of interest charged on refinancing is at least two percentage points less than the rate that you may be paying already. Yet, in certain exceptional cases, it may prove worthwhile if the chargeable rate of interest is less by 1.5 percentage points. As per the thumb rule, the difference needs to be two percent to make refinancing worthwhile.
Other than this aspect, you also need to think of your plans for the house before deciding for any refinancing. If you are going to live in that house for just one or two years, it may not be a good idea to ask for refinancing. Refinancing is recommended for only those homeowners who are going to live in that home for at least three years. The decision may therefore vary with individuals.
If you want to assess if refinancing is indeed going to be helpful in your case, you should have a frank discussion with a reliable professional. Here are the most important benefits that homeowners look forward to due refinancing:
- To gain by having a fixed rate of interest by refinancing an adjustable-rate mortgage (ARM).
- To switch over from one ARM to another, offering a lower rate and probably more attractive terms and conditions.
- To changeover to a loan with a shorter repayment term, thus helping building equity in the home speedily.
- To withdraw funds against the equity that is already built-up in the home for another purpose.
It doesn’t really matter how often you can refinance, as most financial institutions will be happy lending you funds anytime you choose to have the same. So, your criteria should be the ongoing market rates of interest, how long you intend living in that home and the kind of benefits you are expecting from refinancing your mortgage.
In case you don’t find refinancing worthwhile, but are inclined to seek some changes in your present mortgage, you should talk to your present lender. Tell him the modifications you wish to have in the present agreement and how is that going to help you. It may work else you always have the option of getting a second mortgage.