Thanks to historically-low mortgage rates, plenty of homeowners are refinancing and enjoying serious savings over the lifetimes of their loans. But if you've refinanced in the past, you may be wondering if it makes sense to go through the process a second - or even a third time.
According to Zack Assarian, a mortgage originator at Fairway Independent Mortgage Corporation, there are many good reasons to refinance more than once. In fact, he says, "we have had clients refinance three to four times in the past few years."
So if you're thinking about going through the refinance process another time, take a look at what our experts say are solid reasons to refinance again.
Reason #1: You Want to Take Advantage of Even Lower Mortgage Rates
Unless you've been living under a rock, you know mortgage rates are at record lows. And if you're on the fence about repeat refinancing, you'd better make a decision soon.
Why? Because the Mortgage Bankers Association is forecasting that mortgage rates will rise throughout 2013 to a whopping 4.4 percent by the fourth quarter - up from 3.78 percent on February 15, 2013. So the time to re-refinance is now.
But like most good things in life, refinancing comes at a cost, so you'll have to determine if the the rate decrease is worthy of another refinance.
So how much of a drop in your new interest rate vs. your old interest rate justifies the cost of another refinance? Assarian notes that the age of the loan and the loan amount will need to be taken into account, "but in general a refinance makes sense if the rate improves by 0.5 percent or more."
Reason #2: You Want to Remove a Borrower from Your Mortgage
No matter how many times you've refinanced in the past, changes in your personal situation can also require you to go through the process again. For example, maybe you bought a house with a friend or sibling and now want to move the loan to one owner's name.
Another situation that can call for another refinance is a divorce, says Raymond Brousseau, executive vice president of Mortgage Lending at Carrington Mortgage Services, LLC. In this scenario, say you and your spouse are both on the mortgage and want to transfer the mortgage to only one spouse's name after the divorce.
Most lenders won't allow you to simply remove the other spouse from the agreement, according to a report from the Federal Trade Commission (FTC) and the Better Business Bureau (BBB). Instead, the FTC and BBB note that you will typically have to refinance the mortgage so that it is in one person's name only.
Reason #3: Your Financial Situation Has Changed
We all know that life can be unpredictable, and many homeowners have experienced a variety of financial ups and downs over the past five years since the financial crisis erupted.
But even if you've already refinanced your home recently, Assarian says that a job switch, a decrease in disposable income, or other significant changes in your finances could warrant another refinance.
For example, say you're in a 15-year loan term and your income has decreased. You may want to consider refinancing to a longer-term mortgage to lower your monthly payments.
"If a person needs to get out of a 15-year fixed rate because the payments are proving to be too much to comfortably pay each month, then they should refinance back into a 30-year and be comfortable," Assarian notes.
But keep in mind that a major financial change doesn't just have to be limited to an increase or decrease in income.
An improved credit profile can also give homeowners a reason to refinance again, says Brousseau. If your credit scores have gotten better since the last time you refinanced, you may be able to qualify for a more favorable interest rate - possibly leading to sizable savings over the long term.
Reason #4: You Need Cash
Let's say your financial situation is completely stable, you've refinanced once before, and you're happy with the terms of your loan - so refinancing is not on your radar. Don't rule it out just yet: You may be able to benefit from a cash-out refinance for certain circumstances.
What would a cash-out refinance mean for you? Basically, you would take out a new mortgage for a higher amount than what you owe now, and receive a cash payment totaling the difference between the amount you owe and the amount of your new mortgage.
So, when might this strategy be a good idea? "Using a cash-out refinance can make sense in many scenarios," says Assarian. He notes that some people use this money for college saving funds, or for house improvements that can increase the value of their homes.
But, it's important to keep in mind that this might not be a good option for everyone. In fact, the Federal Reserve Board notes that after you go through a cash-out refinance, you will own less of your home. And the less equity you have when you sell your home, the less cash you'll receive from the sale.
Brousseau echoes that warning, noting that "borrowers should carefully consider the potential impact of using up all of their home's equity in what is still a relatively volatile market."
But because every homeowner's situation is different, Assarian recommends speaking with a loan officer who can take a look at your unique situation and give you further guidance on whether another refinance is the best decision for you.
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