How Soon Can You Refinance a Mortgage?

Last updated 03/26/2024 by

Summary:

How soon you can refinance a mortgage will depend on the terms of your mortgage. Some lenders allow you to refinance your mortgage immediately while others require you to wait a set period, such as six to 12 months.

If you find yourself tight on money after taking out a mortgage loan, you may be looking for ways to cut back costs. Monthly payments and interest rates may prove to be too expensive for your budget after some time. Maybe your credit score has increased since taking out the loan, and you could have a better interest rate. These are good reasons to look into a mortgage refinance.

Some lenders allow you to refinance a mortgage as soon as you want, while others may require a seasoning period (usually up to 12 months long). The “seasoning” rules vary depending on the type of mortgage and lender. This article will discuss the “seasoning” rules of each mortgage in detail. However here is a quick summary.

How soon can you refinance a mortgage? There are five main scenarios:

Conventional loans and jumbo loans: You can refinance immediately if you meet the requirements.
FHA loans: 6 to 12 months waiting period depending on the type of mortgage.
VA loans: There is a waiting period of 210 days.
USDA mortgages: six to 12 months waiting period depending on the type of mortgage.

Compare Mortgage Refinance Loans

Compare rates from multiple vetted lenders. Discover your lowest eligible rate.

Compare Rates

What does it mean to refinance a mortgage?

A mortgage refinance is when a lender pays off an old mortgage with a new one. A borrower may choose to refinance a home to shorten their finance term and lower their interest rate. Some also do this to lower monthly payments. If you would like to get a no-obligation quote, contact several of the lenders below and see which provides the best deal.

Rules for refinancing a mortgage

Conventional loan refinance rules

You can refinance your conventional loan as soon as you want if you meet the following conditions:

Your loan is not backed by the Federal Housing Administration, U.S. Department of Agriculture, or the U.S. Department of Veteran Affairs.
It is not a jumbo loan.

If you want to refinance with the same lender, you may have to wait six months before doing so. If you want a cash-out refinance, you must have owned the home for at least six months. An exception to this is if you inherited the property or were awarded it in a formal separation.

Federal Housing Administration (FHA) loan refinance rules

Each FHA refinance option has its own refinances and rules. They are the following:

Cash-out: used if you want to borrow more than you owe and take the difference in cash. To do this, you have to have owned and occupied the home for at least 12 months before applying. If you have a mortgage, you must have had it for at least six months. Mortgage payments due in the last year must have been paid on time.
FHA streamline: Suggested if you have an FHA loan and want to refinance with another FHA loan. It does not require an appraisal. You must have had the mortgage at least 210 days and made at least six months of on-time payments on time. You are only allowed one late payment in the six months before that.
Simple refinance, or rate and term: Recommended if you’re willing to pay for an appraisal and don’t want a cash-out refinance. You have to wait at least seven months and make at least six months of consecutively on-time payments.

Veteran Affairs (VA) loan refinance rules

Whether you’re getting a cash-out refinance or an interest rate reduction refinance, you must wait at least 210 days or made six payments.

U.S. Department of Agriculture (USDA) loan refinance rules

You have three options if you want to refinance your USDA loan into another USDA loan.

Streamlined or non-streamlined finance: These two options have the same requirement. You must have consequently made on-time payments for the last 180 days.
Streamlined assist: Must be up-to-date on your mortgage payments for the last 12 months.

Jumbo loan refinance rules

You can generally refinance a jumbo loan whenever you want.

Reasons to get refinance a mortgage

The following are good reasons why you might want to refinance a mortgage:

Credit score has increased

Credit scores raise if time has passed since a foreclosure, negative information has gotten removed, or errors have been disputed. If your credit score has raised, you could be able to lower your interest rate. This could make you eligible for a home loan with a reduced monthly payment amount.

The interest rate is no longer competitive

If mortgage rates drop, it’s possible that a new mortgage could save you money in interest rates. If the new rate is 0.5% lower than your current rate, it could be worth investing in.

Need for a lower monthly payment

If your financial situation changes and you can’t meet the monthly payments, refinancing a mortgage could help cut back the monthly costs and save some money. For instance, if you start with a 10-year loan and refinance to a 20-year plan, your monthly payments could be lower.

You’ve reconsidered your adjustable-rate mortgage

If the payments for your adjustable-rate mortgage begin to become too high, switching to a fixed-rate mortgage could be a good option to have a steady interest rate.

Remove mortgage insurance

If you have Federal Housing Administration insurance, you will be paying for that for life unless you refinance into a conventional loan. If you chose to refinance for this reason, you must build 20% equity first.

Tap your home equity

If you want to access money built up from equity, a cash-out refinance is one way to do that. However, a cash-out refinance is a loan larger than your existing mortgage. You will have to pay higher upfront costs and more interest over time.

Divorced, separation, or dissolution of a domestic partnership

Refinancing is a way you can remove your name from a mortgage if you took out a joint mortgage with your partner.

Shorten payment period

If you’re wanting to decrease your interest rate, you could shorten the payment period. For example, you could go from a 20 year payment period to a 10 year payment period. The new monthly payments will be higher, but you can save money by only paying interest for a shorter time period.

Factors to consider before refinancing

Refinancing your mortgage can save you thousands of dollars over the life of a loan. However, it’s not always the right choice. Take these questions into consideration before you make a decision.

Will you have a payment penalty?

Some mortgages come with a prepayment penalty or recapture rules. Prepayment penalties charge a fee for paying off mortgages early. Recapture rules require the borrower to reimburse the lender any money they have paid on the borrower’s behalf. Before refinancing, check to see if either of these will affect you.

Can you afford the upfront costs?

Mortgage refinances have the same upfront costs as standard mortgages. These can fall between two to 6% of the loan amount. Even if your new mortgagee has a lower rate, be sure you have enough for the upfront costs.

Will this save you money over time?

Make sure you will save money in the long term with your new mortgage. For example, if you extend your loan, you may have lower monthly payments, but you could end up paying more in interest. A new mortgage could also mean your home equity grows slower, leading to your home selling for less, or limiting the amount of home equity you can borrow.

Frequently asked questions

Can you buy a house and immediately refinance?

Different refinancing options have different requirements, but most require you to own the house and make your payments on time for at least six months.

Does refinancing hurt your credit?

So long as you keep making your payments on time, refinancing your mortgage should not hut your credit score aside of a few points from the hard pulls you get on your report when you apply.

How many times can you refinance your mortgage?

Usually, you can refinance a home as often as you want. However, that doesn’t mean you should. Refinancing a mortgage can be expensive, so consider the overall cost and whether it’s worth the savings you will receive.

What is the downside of refinancing your mortgage?

Refinancing your mortgage takes a lot of effort, and some people may not think it’s worth it. Refinancing could also increase your monthly payments or reduce your home equity.

Does refinancing start your loan over?

Essentially, yes. You are replacing your old mortgage with a new mortgage. If done right, this could save you money in the long run. It can also be an expensive waste of time. Calculate the total cost and savings you will receive from a refinance before you choose a lender.

What’s the difference between a cash-out and no-cash-out refinance?

Cash-out refinancing is when the borrower adds to the principal balance. In a no-cash-out refinance, the borrower refinances only the principal balance, or sometimes less.

If your monthly mortgage payments or your interest rates are getting higher, refinancing your mortgage loan could be a way you can cut back those costs. Refinancing your mortgage means you are replacing your current mortgage loan with a new one. Each route has different requirements to refinance a loan, but most require you to own the property for at least six months and make your payments on time.

Key takeaways

Conventional loans and jumbo loans: You can refinance immediately if you meet the requirements.
FHA loans: 6 to 12 months waiting period depending on the type of mortgage.
VA loans: There is a waiting period of 210 days.
USDA mortgages: six to 12 months waiting period depending on the type of mortgage.

Camilla Smoot

Camilla has a background in journalism and business communications. She specializes in writing complex information in understandable ways. She has written on a variety of topics including money, science, personal finance, politics, and more. Her work has been published in the HuffPost, KSL.com, Deseret News, and more.

Share this post: