How Soon Can You Refinance After Buying?

Mortgage rates aren’t what they once were, but buyers are still moving forward. Many are choosing to secure the home they want now, with plans to refinance later if rates improve.

As rates gradually ease, homeowners are starting to revisit those refinancing plans. But if you’ve recently purchased a home, how soon can you refinance your mortgage?

Short answer: It depends.

Lender and Loan Type Matter

Conventional mortgages can be refinanced almost immediately at the discretion of the lender. But a wait of up to 12 months may be imposed. Other loans have more specific requirements:

• Cash-out loans may require up to 12 months of waiting (and 20% home equity).
• FHA loans have a 210-day waiting period and must be in good standing.
• VA loans must wait 210 days, and VA IRRL (Streamline) loans must also provide a “net tangible benefit” such as a reduced rate or lower monthly payment.
• USDA loans require a 12-month wait, 12 months of on-time payments, and must result in a reduced monthly payment ($50 minimum).

When Refinancing Is Beneficial

• Rates have dropped. Refinancing at a lower rate can reduce monthly payments and save thousands of dollars over the life of your loan.
• Your current rate is adjustable. Adjustable-rate mortgages make future interest and monthly costs unpredictable. Refinancing at a fixed rate provides financial consistency.
• Your credit has improved. A higher credit score may qualify you for more favorable loan terms.
• You need cash. Cash-out refinancing uses equity to fund home improvements and other big-ticket purchases.
• Refinancing can also be used to consolidate home loans, add or remove a borrower, and eliminate private mortgage insurance (PMI).

Other Considerations

A new loan means new closing costs, typically 2% to 6%. Refinancing also resets the amortization clock on your loan, which temporarily delays equity accumulation. Prepayment penalties may also apply.

Have any questions? Reach out today.