Homeowners refinanced in droves over the past year, and with rates as low as they’ve been, it’s no wonder. A mortgage refinance can be a great way to put money back in your pocket each month, save thousands in interest over the life of your loan, or tap into your home’s equity. But just how often can you refinance? And if you’ve refinanced recently, is it worth doing it again?

Why are so many borrowers refinancing?
Last March, the Federal Reserve drastically cut interest rates in an attempt to cushion the growing economic effects of COVID-19.

These historically low rates continued into December when a 30-year fixed-rate mortgage was at a 2.67% interest rate. Heading into 2021, rates began to rise, reaching 3.18% for a 30-year fixed-rate in early April.

How often can I refinance?
While interest rates are still historically low, they are creeping up. And this has some borrowers wondering if they should refinance now before rates climb higher. 

Eric Stevenson, partner with US Capital Mortgage Partners, says in many cases, borrowers must wait six months after their existing mortgage closed before they are eligible to refinance.

“Depending on your lender or loan program, there may not be a waiting period, but there could be extra costs in addition to the standard refinancing fees,” he said.

Outside of the potential six-month waiting period, there is no legal limit to the number of times you can refinance. But like most financial decisions, just because you can do something, doesn’t mean you should.

How do I know if I should refinance?
The biggest downside of refinancing frequently is that you’ll pay closing costs each time, and those costs typically run anywhere from 2% to 5% of your loan amount.

Let’s say you refinanced last year but found out you could lower your interest rate by 1% if you refinance this year. While that could result in significant savings, the decision goes beyond just the fees vs. the interest rate. You’ll also need to consider things like your short- and long-term goals, how long you plan to stay in your home, your loan balance, etc.

“These decisions are custom to the individual, and sometimes personal circumstances are more important that the current mortgage rates,” said Stevenson. “If you’ve already been in your loan for 10 years and have a balance of $80,000, it may not make sense to refinance. However, if you have only been in your loan for 8 months, you owe $300,000, and you’ll be in the home for several years, refinancing is likely a smart financial move.”

And remember, you may assume that since you already have a mortgage you can easily get a new one. But borrowers still need to qualify for the new mortgage when refinancing, and some lenders have raised the bar for credit scores and become stricter with debt-to-income ratios.

Where can I get more information?
With any financial decision this large, it’s important to make an informed, educated decision, and the best person to help you with that is a reputable, local lender.

“There are many online companies advertising low rates, but those rates often aren’t legitimate and there can be hidden costs involved,” said Stevenson. “When you work with online companies you don’t have someone you can hold accountable when issues arise. That’s why it’s so important to work with a local lender who is trusted in the community and puts their clients’ financial interests above the desire to close a deal.”

And if your lender is truly looking out for you, they’ll be honest when the numbers just don’t make sense and also help you see the benefits when you’re missing an opportunity.

“My job is to review my clients’ financial situations and help put them in the best position with their mortgage,” said Stevenson. “Sometimes it’s hard for them to see the bigger picture, but that’s where the education piece comes in. As lenders, we need to ensure that our clients have all the information needed to make a sound financial decision.”

For a list of professional, local lenders. Visit the Greater Lansing Association of REALTORS® website at www.lansing-realestate.com.