Refinancing a mortgage is a great option for people who want to receive an additional financial benefit.

It essentially provides you with new mortgage terms that replace your old deal. You will be able to lower the monthly payments you make, create home equity, or improve overall loan terms. BUT only if you do it at the right time!

If you have questions like can you refinance more than once or when to refinance, you have come to the right place! Let’s learn more about refinancing now.

Why Choose Refinancing?

When you choose to refinance a mortgage plan, it means you are paying off the existing loan you have. You replace the old one with a new contract.

Here are some reasons why homeowners choose to refinance:

● Receive lower interest rates
● Make smaller monthly payments
● Shorten mortgage terms
● Convert from Adjustable-Rate Mortgage to fixed mortgages (or vice versa)
● Improve home equity
● Consolidate debt
● For financial emergencies

Refinancing costs owners 5-7% of the principal of the loan. It will need a title search, appraisal, and application fees. Hence, it is important to carefully evaluate if refinancing is worth it for you.

Can You Refinance More Than Once?

There aren’t any limits to refinancing. You are allowed to refinance the mortgage as many times as you like. However, some lenders do have a waiting period on when you can close a mortgage loan to refinance onto a new plan.
When Is the Right Time to Refinance Your Mortgage?

It can take money and time to start the refinancing option. Hence, you have to carefully consider the financial benefits you will receive.

Here are some good times to refinance the mortgage.

1. To Get Lower Interest Rates

One of the best advantages of refinancing the mortgage is that you can reduce your interest rates. If interest rates are falling in your area, you should definitely see if refinancing would be a good option for you.

For example, you have a 30-year mortgage at a fixed rate that you got five years ago. You had a 4.5% interest rate on a $200,000 loan. This means you are paying $1,013 monthly. With recent refinancing terms, you are able to get a new loan at a 3.25% rate. It can reduce your total monthly payments by $140, which definitely adds up for the remaining 25 years.

So, keep an eye on the latest trends in interest rates as they don’t always stay low. Getting the timing right is vital since you don’t want to miss out on additional monthly savings.

2. To Shorten Loan Terms

If you are now earning more, you may be able to pay off the mortgage sooner than you initially thought. It can make sense to refinance the loan so that you can pay it off quickly. However, you will have to pay more in monthly payments, so do budget for that.

3. If Your Credit Score is Higher or DTI Is Down

When calculating mortgage rates, the debt-to-income (DTI) ration and credit score play a huge part. If you have recently managed to increase your credit score or your DTI has fallen, you will find that refinancing is a good option. You will be able to take advantage of the best interest rates since they are usually given to people with a credit score of at least 780.

With a lower DTI, you will also be less risky for lenders. As long as it is below 40%, you will be able to save money on conventional loans.

4. You Recently Got Married

Newly married couples will find that refinancing a new mortgage plan together can improve its term conditions. Getting married improves the DTI ratio since both of your incomes are used in the calculations. If you both have a great credit score, it can also ensure that you get better interest rates.

5. You Recently Got Divorced

It can make sense to try refinancing after your divorce is processed. It can remove an ex-partner from the mortgage and title deed. However, you should only go for this option if your divorce is fully finalized.

6. Home Value Has Increased

With every monthly payment, your home equity increases. You can calculate the home equity by taking the difference between the real value of the home and your outstanding mortgage payments you have left.

For example, you have a $200,000 property that you have paid $50,000 for. It means you have 25% home equity.

If the value of housing in your area has increased, it could mean that you have way more equity than you thought. For such homeowners, try a cash-out refinancing option. You can receive funding to renovate or make improvements.

If you don’t plan on staying in the home, it will allow you to sell your property for a profit.

However, you should only choose home projects that will get you a high return on investment. For example, kitchen remodels or installing solar panels might get you more buyers but adding a master suite may not be as lucrative.

You can also build an emergency savings account, pay for a kid’s college, pay off credit cards, or use it for other financially beneficial means.

7. You Have Received a Huge Sum of Money

If you have come into a new windfall like an inheritance, you will have some funds to pay off your mortgage loans. A good idea might be to decrease the lifespan of your mortgage.

Since the lifespan of the loan is shorter, you will have lower interest rates to deal with; this means you pay less in the long run! Secondly, you can also try to prepay your loan. However, some lenders have limits and penalties on prepayments. The extra funds can help you absorb the penalty while reducing your interest rate and choosing a shorter term.

8. Your Adult Children Have Left

If your adult children are moving out, you should look at refinancing options, especially if you want to downsize.

Here are some options that may make sense for you:

Cash-Out Refinancing

Parents whose property value has gone up and need to pay for education can seek this option.

Lower Monthly Fees

If you extend the term of the fixed rate, it can increase the interest but reduce monthly payments. It will save you more money to spend on education.

Shortened Repayment Terms

If your children want to start working or have a scholarship, this is a good option for parents. You will have fewer payments around the house. Hence, this will act as a way to expedite the repayment plan with a higher monthly fee. Do check the pre-payment limits in your area before trying this option though.

9. You Are About to Retire

Homeowners can use refinancing to pay off the mortgage with any money they have saved or pensions. You can also extend the terms of the mortgage and pay less every month since you won’t be working any more.

Conclusion

So, can you refinance more than once? Yes, but you have to time it right to receive the financial benefits of refinancing.