What does it mean to refinance?
Just as the word implies, refinancing is simply the act of financing something again. Your needs as a homeowner today may be different from your needs when you originally obtained a mortgage. Borrowers in this position often refinance in order to obtain a new loan with more favorable conditions.
Refinances are common whether current mortgage rates are rising or falling; and you can get one from any bank you choose. You’re not limited to working with your current mortgage lender.
Some of the reasons homeowners refinance include a desire to get a lower mortgage rate, to pay their home off more quickly, or to use their home equity for paying credit cards or funding home improvement.
Refinances typically close more quickly than a purchase mortgage loan and can require far less paperwork.
How many times can I refinance?
Legally speaking, there are no limits to the number of times you can refinance your home loan. However, that does not mean it will always be a good idea to do so. One thing you will want to keep an eye out for is prepayment penalties. Some mortgages include penalties for early payoff that could offset the gains you make by refinancing. Anytime you consider refinancing to save money there are really three variables you need to account for: Interest, costs, and time. You will need to meet with your lender and determine how much you can reduce your interest rate by, and what the closing costs will be to do so. From there you can see how many months it will take for your monthly savings to pay for the closing costs. If you plan on staying in the home longer than that time then it is probably smart to refinance to the lower interest rate.