How Many Times Can You Refinance a Mortgage?

Concept image of examining possibility of refinancing mortgage
Examine several types of home loans before refinancing.

How many times can you refinance a mortgage? There is no limit to the number of times to refinance. In some situations, people refinance their mortgage several times over the course of the mortgage term, but it is important to note that it is not always a good idea to keep doing this.

How Many Times Can You Refinance a Mortgage Cost Effectively

Most mortgages do not have limitations on how often you are refinancing them. You do have to find a lender willing to refinance the loan and must meet all qualifications the lender imposes before the loan will be refinanced. Even with lender approval, there is more to consider.

Prepayment Penalties

When you refinance a mortgage, it is necessary to consider the costs associated with the process. One of the most significant costs associated with refinancing is the prepayment penalty. This penalty is put into the loan contract. It states that if the loan is paid off prior to a certain date or timeframe, a sizable fee is to be paid by the property owner.

Prepayment penalties are usually a percentage of the loan amount. This clause is an addition to a mortgage to protect the lender's profit margin. Prepayment penalties have a design to discourage you from refinancing frequently or paying off your loan too quickly. If you pay off the loan quickly, in either of these methods, the lender does not make the profit it was counting on.

Not all mortgage loans have prepayment penalties.

Closing Cost Expense

Another cost associated with refinancing is the closing costs. Closing costs are all of the extras added on to the loan process. These fees include loan origination fees, appraisal fees, title searches, recording fees, and other costs. These costs may be combined into the loan itself or be paid out of the pocket of the buyer.

Closing costs are usually part of refinancing. These fees may amount to as much as five percent of the amount financed. If a loan is continuously refinanced, the homeowner has to pay the closing costs repeatedly. This eventually becomes quite costly for the homeowner. It may negate any positive benefits of refinancing the loan. This is especially true when the closing costs go into the loan. In this instance, the homeowner then pays interest on those closing costs over the life of the loan.

Deciding to Refinance

How many times can you refinance a mortgage loan? While you may be free to refinance often, it is important to know when you should refinance. Consider the break even point to refinancing for any instance in which you are considering obtaining a new loan.

Filling out mortgage refinance application
  • If interest rates are falling to a point lower than what you are currently payment, determine if they are low enough to allow you to break even after refinancing.
  • Determine what the closing costs on refinancing will be prior to agreeing to the refinance offer from your lender. The closing costs paid should be an important consideration no matter how frequently you plan to refinance your home loan.
  • Determine how long you plan to stay in your home. For example, suppose you can cut $100 off your monthly mortgage payment by refinancing to a lower interest rate. You have talked to a lender who says your closing costs will be $4000. This means, to break even (just against the closing costs) you will need to remain in your home at least 40 months. Those who plan to stay less than this may not be saving money by refinancing their loan.
  • Determine if your current mortgage has a prepayment penalty. This is in addition to the closing costs, if it exists, when determining how long you must remain in your home to break even on the refinancing.

Also note that in order to refinance, you do need to have a lender who will approve you for a new loan. This may be difficult if you have poor credit, a lack of employment or insufficient income to make payments on a new loan.

Was this page useful?
How Many Times Can You Refinance a Mortgage?