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The Frequency of Refinancing

Refinancing

Refinancing: How Often Can You Do It?

Orange County, CA – It’s abundantly clear that the well regulated mortgage industry has many rules. The amount of regulations that have to be observed by mortgage lenders is staggering. However, when it comes to refinancing your property, there’s no real limit as to how many times you can do it. There is no rule in place that stops you from refinancing as often as you like.

Although there’s nothing stopping you from doing this, some investors will take a pretty dim view. Most will expect the loan to be on their books for at least six months. If that loan is paid off in just a few short months, it can mean problems for the lender. Most of the cost of a mortgage is incurred by the lender up front. They realize their profits later on. Therefore, a loan that is turned over quickly can cost the lender significantly. While you might be within your rights to do this, don’t be surprised to find that the investor is charging a fee for the privilege. Most will not allow a no-point/no-fee loan. In addition, unless there is a strong benefit in doing so, the cost of frequent refinancing can often negate the benefits.

Other than the usual restrictions required for underwriting, there is one rule for refinancing.  There must be minimum net tangible benefit for the person from the act of refinancing. A net tangible benefit means that you have to benefit from the refinance. It cannot be done as a loophole to give profit to the originator.

Some loan officers would prey on unsuspecting homeowners by refinancing their loan over and over again for their gain. This is considered churning and is illegal. Back then a dodgy lender would refinance their clients on a frequent basis, lowering their rates marginally without charging costs, which would create huge premiums from lenders. At the time, lowering the rate for their client to their lowest possible point would have saved their clients significant amounts of money, but likewise would have lost the originators tens of thousands of dollars of clear profit from this ‘churning’ technique. As often is the case, it takes bad practice for action to be taken. Following this action, lenders Fannie Mae, Freddie Mac and FHA brought about the minimum criteria to be eligible for refinance. Therefore, lenders and loan officers must prove there is tangible benefit to the borrower for refinancing.

Of course, if you can find a broker you can trust, who advises you in a transparent fashion, you should have no cause for concern. If you’re looking for someone who will take the time to answer your questions and help you through your refinance then give me a call. And remember that transparency works both ways. Lenders need to understand your full situation in order to advise you properly. Those borrowers who don’t fully disclose all of the pertinent information can run into problems later in the process.

Scott Storace

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