How Serial Refinancing Can Help You Save

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Refinancing a mortgage is essentially trading your old mortgage for a new one with more favorable terms, typically a new, lower principal and interest rate. Your lender pays off your old mortgage with the new one and you start paying off the new mortgage. This all seems pretty cut and dry—but what if you decide to refinance again?

How to save with serial refinancing

If you’ve already refinanced your home and are looking to refinance again, you might be a serial refinancer. Serial refinancing is a process by which homeowners refinance multiple times throughout owning their home in order to obtain lower interest rates, which can equate to a lower monthly payment and less money spent in the long run. When mortgage interest rates continue to fall over an extended period, serial financing can help a homeowner achieve significant savings on the total cost of their home.

What factors should you consider before serial refinancing?

There are a number of factors a homeowner should keep in mind when deciding to refinance again and again. If you’ve already refinanced your home, be sure to consider the following:

Credit score: Has your credit score gone down since your last refinance? If so, be aware that you might not get the most competitive interest rate. Lenders typically offer better rates to borrowers with higher credit scores, which means that you may want to spend some time improving your credit before you apply for a refinance.

Debt-to-income ratio: Lenders will also look at your debt-to-income ratio when you apply for refinancing. Your debt-to-income ratio helps to determine how much of a monthly mortgage payment you can take on. Borrowers with lower DTIs have better chances of being approved for a refinance and locking in the best rates. If your debt-to-income ratio has increased since you last refinanced, it might benefit you to first try paying down some debt or increasing your income, if possible.

Closing Costs: Another factor for serial refinancing is closing costs, which may take some time to break even with a refinance. For example, if you don’t have a long runway to repay your mortgage, like if you plan to sell your home in the next year or two, closing costs might negate any money you’d save by obtaining a lower interest rate. You may want to use a break-even analysis to determine if refinancing will save you money in the long run, especially if you don’t plan to stay in your home much longer.

Whether Interest Rates Will Keep Falling: Will current refinance rates keep falling? Can you reasonably anticipate a downward trend when deciding to refinance? And do you have the luxury of time? Homeowners who answer yes may want to continue watching the market until rates hit as low as they’re going to go.

Can serial refinancing impact your credit score?

Another factor to be aware of when deciding to serially refinance is the impact on your credit score. During the application process, lenders will usually pull all three credit reports—Equifax, Experian, and Transunion. This type of “hard” credit inquiry can impact your overall credit score. A new loan will also appear on your credit report, which can decrease the average age of your credit, another credit scoring factor. In short, homeowners who move forward with serial refinancing could likely experience a temporary credit score drop and should be aware of the cost vs. benefit of such an impact.

Is now a good time for serial refinancing?

The short answer is no. The current mortgage rate climate has started to cool, but experts warn that if you refinance now, you could end up with a higher interest rate than the one you had previously, resulting in higher monthly payments. You could consider buying discount points (or mortgage points), but that would add an additional expense and could make it more difficult to break even on your refinance.

Also, keep in mind that you’ll need to pay closing costs on your new mortgage, essentially increasing your total spend on your home.

Though mortgage rates fell from 4.54% in 2018 to 2.96% in 2021, the lowest 30-year mortgage rates in history, in 2022, they shot back up to 5.34% and continued to increase in 2023 to 6.81%. In the summer of 2024, mortgage rates are hovering around 6.93%, demonstrating a continued upward trend over the past three years.

Some experts advise that a good time to think about a refinance is when you can reduce your interest rate by at least 1%, while others recommend that you wait until rates are 2% lower than what your rate currently is. The good news is that forecasters predict mortgage rates will decline from their current high to below 6% by the end of 2025. If this is the case and rates continue to fall steadily, many homeowners may find themselves becoming serial refinancers over the next few years and cashing in on significant savings.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a mortgage professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.