How many times can I refinance?

Posted by  on Feb 03, 2015

Q: Is there a limit to how many times you can refinance? I feel if I keep rolling over the debt, I'm more or less living here for just what it costs in interest, which isn't much, while the equity will build on its own as the price grows.

A: There is no hard-and-fast limit on how often you can refinance, but economic conditions and your personal situation may well limit how often you should do it:

  1. Economic conditions. It is easy to think about refinancing virtually at will these days because mortgage rates have been so consistently low. Incredibly, the best six years ever for 30-year mortgage rates have all occurred during the past six years. That's just the kind of environment that can make people complacent, but just remember that mortgage rates are usually much higher than this. Also, if the housing market slumps, there is a chance you could find your loan under water -- especially if you have been taking cash out each time you refinance.
  2. Your situation. If you experience a serious financial setback like losing your job, you may find that your credit status no longer allows you to refinance. Also, you probably can't keep working forever, so think about how you will continue to meet those mortgage payments in retirement. This is not an issue for people who have paid off their mortgage loans, but if you keep rolling yours over, you will just have to keep making the payments.

It is a function of how far behind them people have put the housing crisis that they are once again starting to talk about rising housing prices as being the norm. Keep in mind, though, that the last couple years have seen a best-of-both-worlds environment, with both rising home prices and some of the lowest mortgage rates ever. As you make long-term plans, just give some thought to what you would do if one or both of these conditions turns against you.

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