If you’re having issues paying your mortgage each month, then it may be worth considering refinancing. Refinancing can help you to save money with a lower interest rate or enjoy a lower mortgage payment. Still, what if you have refinanced your mortgage in the past? Is it a good idea to refinance again — or even possible?
Here’s an in-depth look at how often you can refinance and when it’s worthwhile to work with DC mortgage lenders for a new refinance loan.
How Many Times Can My Mortgage Be Refinanced?
Legally, there’s no limit to how many times you can refinance. Still, there are some rules that DC mortgage lenders will set that stipulate the number of times you can refinance a loan type.
Always remember that you do need to have a certain amount of equity if you plan to do a cash-out refinance. If you have already done a cash-out refi, you may not have enough remaining equity. Each time you access your home’s equity, you reduce the amount of the loan you can access. The majority of lenders won’t allow you to take out 100%, and you’ll have to do calculations to determine just what you have in the way of equity before you refinance.
Should I Refinance My Mortgage Again?
There are many reasons as to why you may want to refinance your mortgage. Here are some advantageous situations:
Lowering your interest rate
If interest rates have gone down since you refinanced the loan then you may want to refinance a second time to enjoy even lower rates. You may be saving money if you can get a lower rate without increasing your term.
Even a small drop in your rate can lead to you saving hundreds, if not thousands of dollars.
Increasing the term of your loan
At the drop of a hat income can change, and even if have refinanced before, you may need to increase your mortgage term to make the payments easier to afford. A foreclosure for lenders and homeowners is far less preferable than a second or even third refinance, although you must bear in mind that you’ll increase the amount you’ll have to pay in interest each time you refinance your loan to a longer-term.
Dropping mortgage insurance
Did you need to buy purchase private mortgage insurance (PMI)? You more than certainly were if you made a downpayment of less than 20% on a conventional mortgage. As a unique form of insurance that protects the lender if you default or stop paying the mortgage, PMI will offer you no protection as a homeowner. You must, however, continue to pay monthly PMI premiums as part of your mortgage. Once you have 20% equity in your home, you can refinance and remove PMI premiums.
This offers a fantastic way to save some money over time, regardless of whether you’ve refinanced the interest rate or term of your loan in the past.
What Needs to Be Considered When Refinancing Multiple Times?
Not everyone will benefit from refinancing their home multiple times, regardless of how attractive the benefits may seem. If you are thinking about refinancing again, you’ll want to first consider some of the following:
Closing costs will need to be paid again
Each time you refinance DC mortgages, you’ll have to pay your closing costs again. Typical closing costs will include the following:
- Application fees: You may be charged an application fee by your lender when requesting refinance. This fee is paid even if you don’t qualify for or receive a refi loan.
- Appraisal fees: Even if you’ve already just had an appraisal your lender may require another one before you can refinance. This will help the lender to ensure that they aren’t lending more than the home is worth.
- Inspection fees: For many, inspections are required before being able to refinance. Certain states will require some forms of inspection before each refinancing, whereas others may only mandate inspections once every 5 to 10 years.
- Attorney review fees and closing costs: In some states, an attorney is required to finalize and review your loan before closing. Attorney fees can vary depending upon which state you are in.
- Title search and title insurance: New lenders will want to ensure no one else has rights to your property when refinancing. Title fees and insurance will need to be paid each time you work with a new lender.
Typically, for your closing costs, you will pay between 2 – 3% of your mortgage amount, although this will vary. This can very quickly make a big dent in your potential savings, particularly if this isn’t the first refinance loan.
Lender’s standards still need to be met
Just as is the case when you purchase a new home, there are lender’s requirements for approving a refinance. If you have less income, a worse credit score, and/or more debt than when you were approved the last time, then you may very well have some difficulty when trying to get approved. Make sure you are well aware of your debt to income ratio, and your current credit and equity scores before applying.
Prepayment penalties may occur
Many lenders will have a clause that penalizes you if you pay off the loan before the term ends. You may be required to pay whatever you may have saved in interest charges, for example, if you attempt to pay off your loan with 5 years still to go. If you have refinanced before and reset the loan’s term, this can cause issues. Carefully check the terms of your loan for a prepayment penalty before you sign.