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Reasons for paying off your mortgage early include eliminating monthly mortgage payments, saving money in interest, reducing financial stress, and more. But, just because you can pay your mortgage off early doesn’t necessarily mean you should.

Should You Consider an Early Mortgage Payoff?

It can be tempting to rush to pay off your home loan when you have the ability to, especially if you’ve struggled with debt management. And why wouldn’t you want to pay off your mortgage? Getting rid of debt could potentially increase cash flow.

When it comes to your mortgage loan, paying it off early depends on your unique financial situation and goals — there is no one right answer.

Reasons Not to Pay Your Mortgage Off Early

While it may seem like there are no reasons not to pay off your mortgage early, that is actually not the case. Here are a few reasons why it may not be a good idea to pay off your mortgage loan early:

You Have a Competitive Interest Rate

Unless you’ve reached all of your financial goals, it may not make the most sense to pay off your mortgage early when you have a competitive interest rate.

For example, if you are saving to send your child to college or you’re trying to rebuild your emergency fund after a home repair, those projects might take priority.

You could also possibly earn more by investing your money as opposed to paying off your loan. If that’s the case, it doesn’t make sense to pay off your mortgage early unless you want the peace of mind that comes with no mortgage debt. Investment decisions should be based on specific financial needs, goals, and risk appetite.

You Would Have Nothing Left in Savings

If you only have enough in the bank to cover your mortgage, it is not advisable to pay it off. Having an emergency fund is necessary and may take priority over not having a mortgage payment.

You Might Face a Prepayment Penalty

Make sure to review your mortgage terms closely. Some lenders charge an early payoff penalty, usually a percentage of the principal balance at the time of the payoff.

You Might Miss Out on the Mortgage Tax Deduction

For many people who itemize, having a mortgage helps push their itemized deductions higher than the standard deduction. It’s worth discussing the mortgage tax deduction with your accountant or other tax professional before you resolve to pay your mortgage off early.

You Have Other High-Interest Debt

If you have other high-interest debt, such as credit card debt, personal loans, or student loans, it may make sense to pay those off in full prior to paying your mortgage off early. Home loans typically have the lower interest rates of other forms of debt and are considered “good debt” by lenders. It only makes sense to pay off your mortgage early if you have no other debts in your name.

When an Early Payoff May Make Sense

On the flip side, there are some situations in which paying off a mortgage early might make more sense than waiting. Reasons to pay off your mortgage early may include:

You’ve Met All of Your Financial Goals

If your emergency savings account is right where you feel it needs to be and you’re diligently contributing to your retirement accounts, there may be no reason not to pay off your mortgage early.

Another idea, however, is to purchase an investment property instead of paying off your mortgage early. This can create a monthly cash flow in addition to the value of the property potentially appreciating over the years.

You’re Interested in Being 100% Debt-Free

Sometimes, just the idea of having loan payments can be mentally taxing, even if you’re in a good place financially. Money is not just about numbers for many; it’s also about emotions.

If paying off your mortgage loan early relieves anxiety because it’s helping you become debt-free, then that might be something to consider.

Of course, reflecting on why you want to become debt-free is important when thinking about paying your mortgage off. If, for example, it’s because you’re approaching retirement and will no longer be getting a steady paycheck, it might make sense to pay off your mortgage.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

Ways to Pay Off a Mortgage Early or Faster

If you’ve decided it makes sense for your financial situation to pay off your mortgage early, here’s how you can do it:

Lump sum. The easiest way to pay off your mortgage early is by making one lump-sum payment to your mortgage lender. Contact your lender prior to making the payment so you can make sure you’re paying exactly what you owe, including any possible prepayment fees.

Extra payments. You could potentially pay more toward your mortgage principal each month if you got a raise at work or you’ve trimmed some fat in your budget.

If you make extra payments toward your mortgage, it could lead to paying off the loan faster than if you were just to make the set payment each month. Make sure to contact your lender prior to making extra payments, though, so you know the extra amount is being applied toward the principal amount only, not the principal and interest.

Refinancing. Another option for paying off your mortgage early is refinancing. Refinancing your mortgage means replacing your current mortgage with a new one, ideally with a better rate and/or term.

If you shorten your loan term from 30 years to 15 years, for example, it may increase your monthly payments but in turn allow you to pay your mortgage off faster. Home loans with shorter terms often come with lower interest rates, too, so more of your monthly payments will be applied to the loan’s principal balance.

The Takeaway

Should you pay off your mortgage early? Maybe. If your retirement account is fully-funded, you have no other high-interest debts, and you’re interested in becoming 100% debt-free, it may make sense to pay off your mortgage early. However, if you do not have fully funded retirement and emergency savings accounts or you could make more money by investing rather than paying off your mortgage debt, it could be best to hold off on paying your mortgage off early.

One way to save on interest and possibly pay off your mortgage early is by refinancing. Refinancing can allow you to lower your interest rate and shorten your loan term, if desired.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

Is it ever worth paying off your mortgage early?

It can definitely be worth paying off your mortgage early in some circumstances. If you have enough money in your emergency fund and your retirement savings, and you can’t make more money investing elsewhere, it may make sense to pay your mortgage off early. And if you’re in good shape financially and averse to debt, it can make sense to pay your mortgage off early for peace of mind.

Is there a tax disadvantage to paying off your mortgage early?

If you pay off your mortgage, you will no longer be able to take a deduction on your mortgage interest. It is possible that this could mean you can’t itemize, which might increase the amount you have to pay in taxes.

What happens after you pay off your mortgage?

Once you’ve paid off your mortgage, you fully own your home and don’t have to make payments on it every month. You will, however, have to pay property taxes and homeowners insurance.

Do extra payments automatically go to principal?

No, when you pay extra money on your mortgage, it does not necessarily go to principal. Not all lenders accept principal-only payments, but you can check with yours to see if they do and find out what the process is. After you start making the payments, it’s a good idea to check and make sure they are being applied properly.

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SOHL-Q225-185

While talking about prenups and postnups isn’t as romantic as discussing your honeymoon or dream house, these agreements can be a financial lifesaver if your marriage were to end.

Both prenups and postnups help determine who would get what if you and your spouse got divorced. But there are some significant differences between them. And depending on your circumstances, one may suit your relationship better than the other.

Here, you’ll learn some of the key ways prenups vs. postnups differ, as well as how to decide if you and your partner would benefit from getting one or the other.

What is a Prenup?

Short for “prenuptial agreement,” a prenup is a legally binding document set up before a couple gets married — hence the “pre” suffix. Prenups may also be known as “antenuptial agreements” or “premarital agreements,” but the bottom line is, they’re contracts drafted before vows are made.

These contracts typically list each party’s assets, including property, bank accounts, heirlooms, collections, pets. etc, as well as any debts either soon-to-be-spouse might carry.

It then details how these assets and financial obligations will be divided in case the marriage comes to an end, either through a divorce or the death of a spouse.

Who Needs a Prenup?

Couples who are getting married for the first time and are bringing little to no assets into the marriage may not need to bother with drawing up a prenup.

However, a prenup can be particularly useful if one spouse is coming into the marriage with children from a previous partnership, or if one partner has a large inheritance or a significant estate, or is expecting to receive a large inheritance or distribution from a family trust.

These types of agreements aren’t just used in case of divorce, but also death, which can be particularly important for couples with children from a previous marriage. If that partner dies, the prenup can define how much of their wealth should be passed onto their children versus their surviving spouse.

Prenups can also be useful for protecting assets earned and property acquired during the course of a marriage, which, without a prenup, are generally considered “shared ownership.” If one partner wants to maintain a separate claim to acquired wealth or possessions, a prenuptial agreement makes that possible.

A prenup can also keep a high-earning partner from being required to pay alimony to their partner in the case of a divorce. However, in some states, a spouse can’t give up the right to alimony, and the waiver may not be enforced by a judge depending on the way the prenup is drafted.

In the event of divorce, a prenup can also help protect a spouse from being liable for any debt, such as student loan payments, the other spouse brought into the union.

What is a Postnup?

A postnup, or postnuptial agreement, is almost identical to a prenup — except that it’s drafted after a marriage has been established.

These contracts may not be as well known as prenups, but postnups have grown increasingly common in recent years, with nearly all 50 U.S. states now allowing them.

A postnup may be created soon after the wedding if a couple meant to get a prenup but simply didn’t get around to it before the big day. Or, it might be drawn up well afterwards, especially if some significant financial change has taken place in the family.

Either way, a postnup, much like a prenup, does the job of outlining exactly how assets, including individual checking accounts, joint bank accounts, property previously owned and purchased together, etc., will be allocated if the partnership comes to an end.

Who Needs a Postnup?

Along with being drafted whole cloth, a postnup can be used to amend an existing prenuptial agreement if there have been big changes that mean the initial contract is now outdated.

And although it’s not fun to think about, if a couple feels they’ll soon be facing divorce, a postnup can help simplify one important part of the process before the rest of the legal proceedings take place.

A postnup, like a prenup, can help separate out assets that would otherwise be considered shared, or “marital property,” which can be important if one partner obtains an inheritance, trust, piece of real estate, or other possession they want to maintain full ownership over.

Postnups can also be part of a renewed effort for a couple to commit to a marriage that may be facing some obstacles and challenges.

Recommended: How to Make Talking About Finances Fun, Not a Fight

Prenup vs. Postnup: Which is Right for Your Relationship?

While it may be a difficult conversation to face with your fiance or spouse, creating a prenup or postnup can be an important step to help you avoid both headache and heartache later on.

If you don’t make a prenup or postnup, your state’s laws determine who owns the assets that you acquire in your marriage, as well as what happens to that property in the event of divorce or death. State law may also determine what happens to some of the assets you owned before marriage.

While almost any couple can benefit from a frank discussion of who gets what in the worst-case scenario, here are the situations in which you might specifically want to consider a prenup vs. postnup.

When to Consider a Prenup

•   If one or both partners have existing children from a previous partnership, to whom they want to lay out specific inheritances in case of death.

•   If one partner has a larger estate or net worth (i.e., if one spouse is significantly wealthier than the other).

•   If one or both partners want to protect earnings made and possessions acquired during the marriage from “shared ownership.”

When to Consider a Postnup

•   If you intended to create a prenup but ran out of time or otherwise didn’t do so before the wedding.

•   If significant financial changes have made it necessary to change an existing prenup or draft a new postnup.

•   If divorce is looking likely or inevitable, and you want to streamline the process of dividing marital assets before undergoing the rest of the process.

In all cases, prenuptial and postnuptial agreements can help simplify the division of assets in the case of either death or divorce — and in either of those extremely emotionally charged scenarios, every little bit of simplification can help.

However, prenups are sometimes considered more straightforward, since they’re made before assets are combined to become marital property.

Prenups may be more likely to be enforceable than postnups should one partner attempt to dispute it after a divorce.

How to Get a Prenup or Postnup

Here are points to consider:

•   For a prenup or postnup agreement to be considered valid by a judge, it must be clear, legally sound, and fair.

•   Couples looking to save money may be able to use a template to create a prenup or postnup themselves.

•   It may still be a good idea, however, for each partner to at least have separate attorneys review the document before either one signs.

•   If your estate is more complex, you may want to consider hiring an attorney to draft the agreement.

•   Either way, having an attorney review the document will help protect your interests and also help ensure that a judge will deem the agreement is valid.

Recommended: How to Manage Your Money Better

Reducing the Odds You’ll Ever Need to Use that Prenup or Postnup

While creating a prenup or postnup can be a smart move for even the most hopeful and romantic of couples, the ideal scenario is a happily-ever-after that leaves those contracts to gather dust.

Fighting about money is one of the top causes of strife among couples, and one of the main reasons married couples land in divorce court.

For some couples, one way to improve their odds might be waiting until they’ve achieved some measure of financial stability before tying the knot. Walking into a marriage with a solid personal foundation, such as a well-stocked emergency fund and a well-established retirement account, can help partners feel empowered and able to focus on other important relationship goals.

Financial transparency, starting before and/or early in marriage, can also help mitigate marital tension over money.

To achieve more transparency, some couples may want to consider opening up a joint bank account, either after they tie the knot or before if they are living together and sharing household expenses.

While there are pros and cons to having a shared account, merging at least some of your money can help make it easier to track spending and stick to a household budget, while also fostering openness and teamwork.

For couples who’d rather not share every penny (or explain every purchase), having two separate accounts along with one joint account can be a good solution that helps keep money from becoming a source of tension in a marriage.

The Takeaway

Prenuptial and postnuptial agreements are both legal documents that address what will happen to marital assets if a married couple divorces or one of them dies.

A prenup is drafted before marriage, while a postnup can be drafted soon after or many years into marriage. Both agreements can make divorce or the death of a partner significantly less traumatic and help divide assets in an equitable way.

Whether you’re looking to integrate your money with your partner or keep at least some of it separate, the right banking partner can simplify money management both before and after you get married.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Are postnups as good as prenups?

Postnuptial agreements can be just as effective as prenuptial agreements, provided they are well-drafted and both parties enter into them voluntarily. Both agreements serve to clarify financial responsibilities and asset distribution in case of divorce. However, postnups may face more scrutiny in court because they are made after the marriage, potentially under different emotional circumstances. Ensuring the agreement is fair and legally sound is crucial for its effectiveness.

What are the disadvantages of a postnuptial agreement?

Postnuptial agreements can strain a marriage, as they may be seen as a lack of trust or commitment. They can also be more challenging to enforce if one party claims they were coerced or if the agreement is deemed unfair. It’s important to handle the process with sensitivity and legal guidance.

Is a postnup enforceable?

A postnup is generally enforceable if it meets legal requirements, such as being in writing, signed by both parties, and notarized. It must be fair and not result from coercion or fraud. Ideally, both parties should have independent legal representation, as this helps to ensure the agreement is valid. Courts may scrutinize postnups more closely than prenups due to the emotional dynamics of a marriage, but a well-drafted postnup can still hold up in court.

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SOBNK-Q225-072

Buying a home is a major responsibility. If you’re unable to continue paying the mortgage on your house, what happens next? You’ve heard of foreclosure, which can result in losing your home and be financially damaging. But there’s another option called a deed in lieu of foreclosure, which may be less stressful than foreclosure, could have less negative impact on a credit report, and might be faster to complete.

Note: SoFi does not offer a Deed in Lieu at this time.

Here’s what you need to know about a deed in lieu of foreclosure, and when it might be an option to consider.

What Is a Deed in Lieu of Foreclosure?

While a foreclosure may involve the court and a lengthy process, the alternative, a deed in lieu of foreclosure, is fairly simple.

If your lender agrees, you hand over the deed to them and the lender releases the lien on the property. You may be released from any balance you owed on the mortgage (however, there may be exceptions if you owe more than the home is worth).

And while a deed in lieu will appear on your credit report, it doesn’t have as severe an impact as a foreclosure.

The lender might even offer you financial assistance to relocate or let you rent temporarily while you find a new place to live.

Recommended: Tips On Buying a Foreclosed Home

Working With the Lender

Your lender may only consider a deed in lieu of foreclosure in certain situations.

For instance, the lender might require that you first put your home on the market as a short sale or explore a loan modification.

If you’re completely unable to pay, start by contacting your lender and asking if a deed in lieu of foreclosure is an option. If it is, you’ll be given an application and asked for documents proving your inability to pay the mortgage. The documents will show your income and expenses, as well as bank account balances.

This process can take 30 days or more.

If your application is approved, you may want a real estate lawyer to review it to help you understand whether you are fully released from the financial obligations tied to the mortgage. For example, if the lender sells the home for less than the remaining mortgage balance, are you responsible for that deficiency?

Once you are comfortable with the title-transferring agreement, you and the lender will sign it, and it will be notarized and recorded in public records.

At this point, you will be notified how long you have to leave the home.

When to Consider a Deed in Lieu

One instance when a deed in lieu may be a good idea is if you owe more on your home than it is worth, as long as the agreement stipulates that you won’t owe the difference between the value of the home and what you owe.

If you are unable to continue paying your mortgage, it’s important to know that a foreclosure will leave a nasty mark on your credit report for seven years and make it difficult or impossible for you to take out another mortgage for years.

A deed in lieu will appear on your credit report, but it may not have the same lasting effect. Your credit score will drop, but in the long term, it may not affect your ability to take out a loan.

Benefits of a Deed in Lieu

There are advantages for both the borrower and the lender when it comes to a deed in lieu. For both, the big benefit is not having to go through the long and expensive process of foreclosure.

Because a deed in lieu is an agreement between you and the lender and not an order from a court, you may have a little more flexibility in terms of when you vacate the property.

With foreclosure, you are sometimes forced to vacate within days by local law enforcement. With a deed in lieu, you may even be able to work out an arrangement where you rent the property back for a period. The lender gets a little rent money and you have more time to figure out your next move.

In addition, this option is more private than a foreclosure.

From the lender’s perspective, the benefits of a deed in lieu include avoiding litigation and court time.

Drawbacks of a Deed in Lieu

There are disadvantages as well. A deed in lieu will appear on your credit report, even if it’s not as damaging as a foreclosure. Plus, it may still be difficult to get another mortgage in subsequent years. Many lenders won’t issue you a mortgage until at least four years after your deed in lieu, and government-backed programs typically treat it as a foreclosure.

If you owe more than your home is worth, you may still be on the hook for the difference between the appraised property value and what you owe.

You may be denied a deed in lieu if there are other liens or tax judgments on the property, or if the home is in bad condition and requires maintenance to sell.

Recommended: Home Affordability Calculator

Being Smart About Your Mortgage

The best thing to do, if at all possible, is to avoid getting into a situation where you can’t afford to pay your mortgage. If you’re having short-term financial issues, talk to your lender immediately to see if there is the possibility of delaying a few months’ payment or setting up a loan modification so you can work to pay off your outstanding debt.

Typically, the lender will want to help you; it’s easier to work out an agreement now than several months down the road, when you haven’t paid your mortgage at all and are facing foreclosure.

If you do end up in a situation where you are unable to continue paying your mortgage and you aren’t offered options, consider a deed in lieu of foreclosure as a faster and easier solution than a foreclosure.

If you’re just starting to consider buying a home, create a budget and calculate how much in mortgage payments you can afford each month. Don’t forget to calculate insurance and interest as well. Make sure that you won’t be stretched thin financially.

Recommended: Mortgage Calculator

The Takeaway

If you can’t pay your mortgage and you’re unable to get a short sale or loan modification approved, a deed in lieu of foreclosure may be the best option. Rather than go through the foreclosure process, a deed in lieu allows a borrower to sign a property over to the lender. Your credit will take a significant hit, though not as bad as with a foreclosure.

FAQ

Does a deed in lieu of foreclosure affect your credit score?

A deed in lieu of foreclosure will typically have a negative effect on your credit scores, but a foreclosure would affect it even more severely. Your mortgage will be listed as closed and have a balance of zero, but it won’t be shown as paid in full and can remain on your credit report for up to seven years. Your credit score will probably be affected as long as the mortgage remains on your report.

Why do lenders prefer a deed in lieu of foreclosure to a foreclosure?

There are several reasons why a lender may prefer a deed in lieu of foreclosure to a foreclosure. A deed in lieu lets them avoid litigation, which can be lengthy and expensive. Furthermore, in a foreclosure, the property may remain vacant for an extended period and deteriorate, but a lender will want the property in good condition so it will be easier to sell.

Can you buy a house after a deed in lieu of foreclosure?

After a deed in lieu of foreclosure, you may need to wait several years before you can get a mortgage again. Many lenders won’t issue you a mortgage until at least four years after your deed in lieu, and government-backed loan programs generally treat a deed in lieu the same way they would an actual foreclosure, with a waiting period of several years, depending on the loan type.

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SOHL-Q225-167

Other than possible lender-imposed waiting periods after a mortgage loan closes, you can generally refinance your home as many times as you like. But you’ll want to do the math first.

Homeowners choose to refinance for a number of reasons: to lower monthly payments, take advantage of lower interest rates, get better terms, pay the loan off more quickly, or eliminate private mortgage insurance.

Refinancing involves paying off the current mortgage with a second loan that has (ideally) better terms. Borrowers don’t have to stay with the same lender – it’s possible to shop around for the best deals.

Mortgage rates seem to be constantly in flux, moving mostly in parallel with the federal interest rate. In 2021, the average rate of a 30-year fixed mortgage was 2.96%. In 2022, as the Federal Reserve raised interest rates to try to tame inflation, mortgage rates began to rise and jumped to more than 7.00% in October. By mid-May 2025, the average rate of a 30-year fixed mortgage was 6.81%.

So is now the right time for you to refinance? Here are some things to consider before taking the plunge.

The Basics of Mortgage Refinancing

Because a homeowner who chooses to refinance is essentially taking out a new loan, the cost of acquiring the new loan must be compared with potential savings. It could take years to recoup the cost of refinancing.

As with the initial mortgage loan, a refinance requires a number of steps, including credit checks, underwriting, and possibly an appraisal.

Typically, however, many homeowners start with an online search for the rates they qualify for. (A lower average mortgage rate doesn’t necessarily translate to an individual offer—creditworthiness, debt-to-income ratio, income, and other factors similar to what’s required for an initial mortgage will matter.)

The secret sauce that makes up a mortgage refinance rate might seem like a mystery, but there are some common factors that can affect your offer:

•  Credit score: As a general rule, higher credit scores translate to lower interest rates. A number of financial institutions and credit card companies will give account holders access to their credit scores for free, and a number of independent sites offer a free peek, too.
•  Loan term/type: Is the loan a 30-year fixed? A 15-year? Variable rate? The selected loan repayment terms are likely to affect the interest rate.
•  Down payment: A refinance doesn’t typically require cash upfront, the way a first-time mortgage usually does, but any cash that can be put toward the value of a loan can help reduce payments.
•  Home value vs. loan amount: If a home loan is extra large (or extra small), interest rates could be higher. But generally speaking, the less the mortgage amount is compared with the value of the home, the lower the interest rates may be.
•  Points: Some refinance offers come with the option to take “points” in exchange for a lower interest rate. In simplest terms, points are discounts that lower your interest rate in exchange for a fee you pay upfront.
•  Location, location, location: Where the property is physically located matters not only in the determination of its value but in the interest rate you might receive.

What Types of Refinance Loans Are Out There?

As with first-time home loans, consumers have a number of refinance mortgage options available to them. The two most common types involve either changing the terms of the original loan or taking out cash based on the home’s equity.

A rate-and-term refinance changes the interest rate, repayment term, or sometimes both at once. Homeowners might seek out this type of refinance loan when there’s a drop in interest rates, and it could save them money for both the short term and the life of the loan.

A cash-out refinance can also change the terms or interest rate, but it includes cash back to the homeowner based on the home’s equity.

Within those two basic types of refinance options, conventional mortgages from traditional lenders are the most common. But refinancing can also happen through a number of government programs.

Some, like USDA-backed loans, require the initial mortgage to be a part of the program as well, but others don’t, such as the VA loan program, which has a VA-to-VA refinance loan called an interest rate reduction refinance loan and a non-VA loan to a VA-backed refinance. That’s why it’s important to shop around to find the best option.

How Early Can I Refinance My Home?

If a home purchase comes with immediate equity — it was purchased as a foreclosure or short sale, for example — the temptation to cash out immediately with a refinance may be strong. The same could be true if interest rates fall dramatically soon after the ink is dry on a mortgage. Especially for conventional loans, it may be possible to refinance right away. Others may require a waiting period.

For example, there can be a six-month waiting period for a cash-out refinance. Or, refinancing via government programs like the FHA streamline refinance or VA’s interest rate reduction refinance loan can require waiting periods of 210 days.

Lenders can require a waiting period (also called a “seasoning period”) until they refinance their own loans for a number of reasons, including assurance that the original loan is in good standing.

For a cash-out refinance, some lenders may also require that the homeowner has at least 20% equity in their property.

Questions to Ask Before You Refinance

Just because you can refinance doesn’t necessarily mean you should. First, ask yourself these questions.

What Is the Goal?

Identifying the endgame of a mortgage refinance can help determine whether now is the right time. If a lower monthly payment is the goal, it can be wise to play around with a refinance calculator to see just how much a lower interest rate will help.

For years, it has been a general rule that a refinance should lower the interest rate by at least two percentage points to be worth it. Some lenders believe one percentage point is still beneficial, but anything less than that and the savings could be eaten up by closing costs.

What Is the Total Repayment Amount?

It’s important to remember that a lower monthly payment—even if it’s significantly less—doesn’t necessarily equal savings in the long run.

If a mortgage with 20 years remaining is refinanced to lower the monthly payment, for example, the most affordable option could be a 30-year mortgage. But is the lower monthly payment worth it if you’ll be paying it off for 10 additional years?

Will I Need Cash to Close?

One of the biggest differences between a first-time mortgage and a refinance is the amount it costs to close the loan. Many times, closing costs for a refinance can be rolled into the loan, requiring no cash at the outset.

Closing costs typically come in at 2% to 5% of the loan amount, and although they can be rolled into the loan and paid off over time, that could mean the new monthly payment isn’t as low as planned.

One way to make sure the investment is worth the cost is to consider how long it would take you to reach the break-even point, which is when you recoup the costs of refinancing. For instance, if it takes you 24 months to reach the break-even point, and you plan on living in your home for at least that long, refinancing may make sense for you.

The Takeaway

Technically, you may be able to refinance your home as many times as you like. But there are potential limiting factors, like waiting periods with some loan types and lenders, and lender’s preferences, for instance. Additionally, having to pay multiple sets of closing costs can limit the financial benefits of refinancing. That said, if you do your homework, a refinance can be a smart, strategic choice.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

Is there a downside to refinancing multiple times?

Typically, the biggest potential downside to refinancing multiple times (or even once) is the cost of closing, which usually runs between 2% and 5% of the loan amount — each time you refinance. Additional downsides are losing equity in your home and, depending on the kind of refinance you get, potentially extending the period of time during which you have to make payments.

How frequently can you refinance a mortgage?

Technically, there is no limit on the number of times you can refinance your mortgage, assuming that you can find a lender willing to accommodate you. Bear in mind that each refinance will typically come with its own set of closing costs, so it’s important to calculate whether a given mortgage refi will make sense financially for you.

Does refinancing hurt your credit score?

Applying to refinance your mortgage could potentially result in a small, temporary dip to your credit score. That’s because the lender usually performs a hard inquiry to check your credit. Also, refinancing involves closing your old loan and taking on a new one, which can also affect your credit score slightly.

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