How often can you refinance your home?

Refinancing your mortgage can save you money and let you borrow your home's equity. But how often can you refinance? There's no absolute limit on how many times you can refinance your home. Still, you may need to wait a while between refinances and meet your lender's mortgage requirements each time you refinance. It's also important to weigh the cost of refinancing against the benefits.

Key takeaways:

• There's no limit to the number of times you can refinance your home, though some loans make you hold them for a time before you can refinance.
• While refinancing can save you money or allow you to borrow your equity, it's important to weigh the cost of refinancing against the benefits.
• As when you originally financed your home, lenders will evaluate your financial situation before approving a mortgage refinance.

Why refinance your mortgage more than once?

There are many reasons homeowners refinance their mortgages, most of which involve saving money on their home loan or borrowing their equity. There's no real difference between refinancing your home for the first time or the fifth – you still must meet your lender's requirements for the new loan. Here are some common reasons people refinance.

To obtain a lower interest rate

A general rule of thumb in real estate is that it's worth refinancing if you can reduce your mortgage interest rate by 1% – 2%. If you refinanced your loan and find shortly thereafter that interest rates have come down, it may make sense to refinance again.

To change your loan term

If your income has increased, you may want to consider refinancing to a shorter mortgage loan term, allowing you to pay off your mortgage earlier and save on interest. On the other hand, extending your loan term reduces your monthly payment, making it more affordable. However, you can expect to pay more interest on your loan.

To eliminate mortgage insurance

If you bought a home using a conventional loan and made a down payment of less than 20%, you have private mortgage insurance premiums added to your monthly mortgage payment. You can cancel PMI when your equity reaches 20%. You can achieve this by paying down your balance or if your home increases in value. If your home's value increases and you have more than 20% equity, you can refinance your home and cancel PMI early.

If you have a Federal Housing Administration loan, you must pay mortgage insurance premiums for 11 years if you put down 10% or more or for the duration of the loan if you put down less than 10%. Once you reach 20% equity, however, you can refinance into a conventional loan and avoid paying both mortgage insurance and PMI.

To borrow your home equity

If you want to borrow money to pay for home renovations, college tuition, or to consolidate high-interest debts, a cash-out refinance allows you to borrow your equity and repay it as part of your new loan. If you recently refinanced without tapping into your equity and now need to borrow cash, a cash-out refinance can make sense.

Factors to consider when refinancing multiple times

While refinancing helps many homeowners achieve their financial goals, there are drawbacks to refinancing more than once.

You can deplete your equity

Frequent refinancing may leave you without sufficient equity to refinance. Most lenders won't let you borrow 100% of your home's value. You usually must keep at least 10% – 20% in equity if you're refinancing a home. Since every situation is different, you'll need to do some math and figure out exactly how much equity you have before refinancing.

You always pay closing costs

Refinancing isn't free. Every time you refinance, you pay 3% – 6% of the loan amount in closing costs. You can avoid paying those fees up front with a no-closing-cost refinance, but that just wraps those fees into your loan balance and likely will cost you more in interest.

If you refinance to reduce your monthly payment, you'll need to recoup what you spent in closing costs before you start saving money. This is called the refinance break-even point. If you refinance before reaching the break-even point on your previous refinance, refinancing again will lose you money.

You'll need to meet your lender's credit standards

You must meet your lender's standards when you refinance. If you have more debt, less income, or a lower credit score than when you last refinanced, getting approved to refinance again may be difficult. If you're approved with a less stable financial situation, your interest rate may be higher than you anticipated. Check your credit score and take time to calculate your debt-to-income ratio and home equity before you refinance. If you don't meet the requirements for the loan you want, consider waiting until you've improved your finances to apply.

Your mortgage may make you wait to refinance

If you want to refinance your home loan, the type of mortgage you have can affect your timeline.

• Conventional loans: Most lenders require a 6-month seasoning period before you can refinance a conventional loan.
• FHA loans: An FHA Streamline refinance requires you to wait 210 days after your original loans' closing date. For an FHA cash-out refinance, you'll need to wait at least 6 months from your previous loan's first payment.
• VA loans: A VA refinance requires you to wait 210 days after your previous mortgage's first mortgage payment.

You could face prepayment penalties

While Rocket Mortgage^® has no prepayment penalties, some lenders require you to pay a fee if you repay the loan early. This can create a problem if you've previously refinanced and reset your loan's term. Before refinancing your home again, review the terms of your last refinance to determine if your loan has an early repayment penalty.

Your credit score might suffer

Refinancing your home can reduce your credit score because you're taking on a new mortgage. While scores typically recover quickly from the initial credit inquiry, frequent refinances that increase your debt loan could weigh down your credit score enough to make it difficult to qualify for the best interest rates.

The bottom line: You can refinance your home multiple times

Refinancing your mortgage numerous times can help you achieve your financial goals. If refinancing saves you money, it can be the right move. However, ensure that each refinance benefits you before you commit.

Ready to refinance? Start your application online with Rocket Mortgage.