If you have a home loan, you can lower your interest rate and adjust the terms of your mortgage to potentially save money and improve your mortgage agreement. When you take out a new home loan and replace your old one, that’s called refinancing a mortgage. Some people refinance their home more than once when they have improved options available through their current lender or from a new lender.
If you’re interested in refinancing, you may be wondering, can you refinance loans more than once? Read on to learn about refinancing limits and how refinancing your home could benefit you.
Does Arizona Limit The Amount Of Times You Can Refinance A Mortgage?
Legally, there’s no limit in Arizona (or any state) to how many times someone can refinance their mortgage. However, most lenders will have a waiting period, typically known as the “seasoning requirement,” which requires the borrower to wait a specified period of time before doing another refinance.
Typically, the refinance seasoning requirement is between 6 to 12 months. This is especially true for cash-out refinancing, which allows you to replace your existing mortgage with a bigger mortgage and access the cash difference. Cash-out refinancing typically has at least a 6-month seasoning period.
If you’re refinancing to eliminate private mortgage insurance, the seasoning requirement could vary and extend to up to two years, depending on the lender. The seasoning period may also vary depending on the type of home loan you get.
For example, if you get a government-insured loan through the Federal Housing Administration (FHA), there’s at least a 12-month owned and occupied period for cash-out refinancing. Veterans Affairs (VA) loans require a seasoning period of at least 210 days before refinancing.
Each lender, whether a conventional lender or the federal government, will have their own seasoning period terms. If you’re refinancing with a different lender, you may be able to refinance sooner than attempting to refinance with your current lender. Check and compare refinancing terms to find the terms that work best for you.
Reasons Why Refinancing Your Home More Than Once Makes Sense
Even if you love your initial home loan terms, you may still want to consider refinancing later to save money and hassle long-term. The following are some situations where refinancing may make sense.
Securing a lower interest rate
When interest rates drop, you can take advantage of them by refinancing your home loan to lower your rate. You may also get a lower interest rate if your credit score has significantly improved since you applied for your previous home loan.
You can use our mortgage refinancing calculator to see how much you can save. For example, using the refinance calculator, say you have a loan amount of $175,000 at a current interest rate of 6.9%. You refinance the same loan amount to an interest rate of 4.9%. Over a 30-year term, you could decrease the total cost over the life of the loan from $356,402 to $337,255. That’s a savings of more than $300 per month and more than $19,000 altogether.
Switching your loan term
Maybe you’re someone who doesn’t like having debt looming. Or, perhaps you got a raise at work, and you can pay more each month toward your home loan to pay your mortgage off faster.
You may also be in a situation where you want more time to pay off your mortgage. Or, you may want to lower your monthly payments and you’re willing to extend the length of your loan. In situations like these, you can refinance your mortgage to adjust the timeframe in which you pay it off.
Getting rid of private mortgage insurance
Depending on the terms of your loan, you may initially be required to pay private mortgage insurance (PMI) to secure your mortgage. Typically, borrowers who make a down payment of less than 20% will have to get PMI. Depending on your mortgage amount, this can end up costing hundreds or thousands of dollars a year.
While you may be able to eliminate PMI as you pay off more of your home loan, you may also be able to get rid of it through refinancing. If you can refinance a home loan to lower your mortgage balance to less than 80% of the home’s value, that could provide a path to eliminating PMI, which can help you save more each month.
If your home has grown significantly in value, you may want to consider refinancing. You could also potentially save by refinancing from an FHA loan to a conventional loan once you’ve achieved 20% equity.
Things To Consider When Refinancing Multiple Times
There are times when refinancing may not be a good idea. Before you seek out refinancing, consider these factors.
- Closing costs: There may be no-closing-cost refinance options available, but otherwise, you’ll need to pay closing costs for refinancing. Like closing costs you’ll encounter when securing an initial home loan, these can include an application fee, an appraisal fee, an inspection fee, attorney review fees and closing fees. You’ll want to calculate the savings you can get through refinancing compared to the fees you’ll be paying to see if it’s worth it.
- Credit score checks: You’ll also have your credit accessed to determine your creditworthiness for refinancing. If your credit score and debt-to-income ratio (DTI) aren’t up to standard, you’ll end up with a hard inquiry on your credit report with the risk of not getting approved.
- Prepayment penalties: Not all lenders penalize borrowers for paying off their home loan early, but some will charge you a prepayment penalty fee.
- Time: Your time is valuable. You’ll have to dedicate time to meeting with your current lender and potentially a new one, filling out paperwork, completing the closing process and more. If the savings you’ll get with refinancing are minimal, you may be more interested in protecting your time than going through the refinancing process.
- Monthly costs: If you’re refinancing to shorten the length of your loan, you’ll likely have to pay a higher monthly payment toward your home loan. Make sure you’re comfortable taking on this responsibility, so you don’t struggle to make your payment if your financial situation changes.
Before you refinance, check your financial standing and how much equity you’ve built in your home. Use a refinancing and debt-to-income calculator to evaluate your options to protect your money, your time and your peace of mind.
Refinance Your Mortgage With Arizona Central Credit Union
For most people, a home is one of their most important financial assets. If better mortgage terms are available, refinancing your home loan could save you significantly over time.
Wherever you are in your homeowning journey, know that refinancing your loan to get a better interest rate, term or monthly savings may be a good option when you can save.
To learn which options are available, visit Arizona Central Credit Union’s Mortgage Refinance page. Call us at (866) 264-6421 or contact us online to learn more.
