As you probably already know, it’s not always wise to stick with the mortgage you originally took out when you bought your home. Mortgages are typically 15 or 30-year contracts, and a lot can happen in the many years since you took out your loan.
You may have already refinanced your mortgage one or more times. The last time you refinanced, you may have realized that things had changed for you. For example, interest rates had dropped, you needed to cash in some equity in your home, or you may have wanted to change the payment period on your mortgage. So you refinanced.
Now, as you review the situation, you may find that it makes financial sense to refinance again. If you are considering refinancing your mortgage again, here are 5 answers to frequently asked questions about refinancing:
- How soon after closing a mortgage can I refinance?
The answer to this question depends on your lender. Some mortgage lenders offer loan terms that do not specify a minimum time frame for refinancing. Others do. In the latter case, it’s a seasoning requirement. But, even if your current lender has such a requirement in place, if more than a year has passed since you signed your mortgage, you should be able to refinance now without a problem.
- How many times can you refinance a mortgage?
From a legal standpoint, there is no limit to the number of times you can refinance. The only potential obstacles to refinancing multiple times would be, for example, if you were to deplete the equity in your home during the refinancing process. If this is the case, you may have to wait a little longer before refinancing again.
- What are the benefits of refinancing?
Refinancing can result in lower monthly payments, lower total loan costs, and the ability to cash in on the equity in your home. The equity can be used to pay off higher interest rate debt, undertake renovations or pay other expenses. Refinancing usually involves closing costs, so each time you refinance, you may incur a short-term loss. However, if you can get a lower interest rate, have a high-interest debt to pay off, or plan to stay in your home for a few more years, it can make a lot of sense to do it now.
- Can I eliminate PMI by refinancing?
Yes, you can potentially eliminate PMI by refinancing. The two conditions you must meet are:
a. you have made your mortgage payments on time each month for one year
b. you have at least 20% equity in your home – through home appreciation or paying off your mortgage.
- Should I refinance even if my interest rate changes only slightly?
In this case, you should plan to stay in your home for a few years to make refinancing worthwhile. However, even if you get the same interest rate with your refinance, it may be worthwhile to refinance because you may be able to transfer higher interest rate debt or have an interest-only payment option.