Refinancing Your Refinanced Home Mortgage

A Home Buying Article Contributed by Elizabeth Fox-Wise

Refinancing Your Mortgage Can Be a Real Money Saver

With interest rates at an all time low, you might be considering refinancing your mortgage. Refinancing your mortgage to a lower interest rate can decrease your monthly payments and save you thousands of dollars over the life of the loan.

In general, the rule of thumb when considering refinancing a mortgage for a lower interest rate is that if the new rate is two percentage points or more lower than the old rate, it makes sense to consider mortgage refinancing. However every situation is different and it will depend on how much the refinancing will cost as compared to the savings from refinancing. If you intend to keep the house long enough to recover your expenses from refinancing and realize a profit, then it is probably a good idea to do it.

Refinancing May Still Be a Good Idea Even If Your Mortgage is Already Refinanced

Refinancing a refinanced mortgage is no longer uncommon. During the 2000s, interest rates continued to decline. Many homeowners refinanced their mortgage at the early stages of the interest rate decline, realizing a monthly savings. Then when the interest rates kept going down, they considered refinancing again.

During 2004 it was possible to refinance your home and then refinance it again a few months later at a significantly lower rate. Many homeowners did this, some three or more times.

Now that there is such a thing as "no cost" refinancing, choosing to refinance your mortgage again in a shorter time is a more viable option. Homeowners should realize though that this means of refinancing is not really no cost. It just means that instead of paying the cost of refinancing up front, it gets added on to the balance of the mortgage loan. Therefore, since you are paying for it slowly along with your monthly mortgage payments, you are also paying interest on the refinancing costs.

However, if the savings are enough to make it worth it, then refinancing your refinanced mortgage is a good idea.

There May Be a Tax Advantage to Refinancing a Refinanced Mortgage

Another advantage that you might have by refinancing a second time is that it could come with a tax advantage.

If you pay points as part of your refinancing, you usually cannot deduct them at the time of refinancing. Instead, you must deduct the cost of the points over the life of the loan. However, when you are refinancing a mortgage for a second time, you can deduct any points that you paid on your first refinance that you haven't deducted yet.

Let's say for example, you refinanced in 2004 and paid XXX in points, you would only be able to deduct X in 2004, and the rest would be deducted over the life of the loan. Refinancing twice in 2004 would allow you to deduct the entire XXX amount on your 2004 tax return.

Refinancing a refinanced mortgage can sometimes be a smart financial move. Just because you have already refinanced once, you should not assume that you have to keep the same mortgage for the rest of the life of the loan.