To Refinance, or Not to Refinance, That Is the Question …
- posted 6.18.2019
- Taylir Paynter
- Home Loans
How Often Can You Refinance Your Home?
So, you’ve bought a home. Maybe you’ve even refinanced it one or more times. Now you’re wondering, “can I refinance again?” Well, technically, there is no limit to the actual amount of times you can refinance your home. So, the bigger question remains, “is it in your best interest to refinance?” Let’s take a look at some of the factors that may guide your decision.
The Rates Are Great, You Just Can’t Wait
First and foremost, today’s historically low interest rates may be just too good to pass up. Getting a low rate can translate into some serious savings of thousands of dollars over the life of the loan. Just a 1% rise or drop in the interest rate could significantly affect your monthly mortgage payment. Even if you’ve recently refinanced your home, it may be in your best interest to refinance at a lower interest rate, especially if you wish to “trade-in” your adjustable rate mortgage for the security of a lower locked-in, fixed-rate loan.
You Could Really Use the Cash
Whether it’s a lower monthly payment from refinancing or a cash-out loan, your financial needs can be easily met by refinancing your home mortgage. This can allow you to consolidate some debts, help pay off a second mortgage, reinvest in some needed home improvements or even make a nice nest egg for retirement or your child’s college fund.
Long-Term vs. Short-Term Financial Planning
Is saving money over the long-term with a higher monthly payment in your plans? Or do you need a lower monthly payment now? Also, how soon do you want to be debt-free? Depending on your income, your budget and your comfort level, the choice between a 15-year and 30-year mortgage is a stark contrast and a personal one that should match your financial needs and goals. With a 30-year mortgage, you will generally pay more interest on a higher rate over the life of the loan in exchange for lower monthly payments. In contrast, a 15-year mortgage usually yields higher monthly payments in the short-term, but a much faster payoff date with possible savings advantages on a lower interest rate.
Is It Time to Say Goodbye to Your PMI?
Homebuyers who made a down payment of less than 20% of the home’s price are generally required to purchase mortgage insurance. The added cost of Private Mortgage Insurance (better known as “PMI”) can range anywhere from .3% to 1.5%1 of the original loan amount to be paid annually. (When you’ve reached 22% equity, the lender is required to remove it.) The good news? By refinancing, you can eliminate your PMI if your home value has increased enough.
Obviously, every loan is based on its own unique situation with its own special conditions. For instance, if you want to refinance your home immediately after refinancing with a cash-out loan, most lenders will usually make you wait a minimum of 6 months. Your eligibility as well as your credit score will also affect your ability to get a loan. Other questions are even more targeted to the individual buyer: is there enough equity in your home to warrant a refinance? Do you meet all the loan requirements? Is your loan close to be being paid off, so that the expense of closing costs will outweigh the potential savings of refinancing? Do you have any prepayment penalties on your existing loan should you pay it off early? Can you wait until the prepayment penalty expires before refinancing? Do you need to pay points or fees on your new loan? Do you need impound account monies? All good questions—only your unique case can determine the answers.
Get in touch today with a New American Funding lending professional who can help you decide whether refinancing is for you.