Are you ruminating about a refi? How soon you can refinance your home depends on the kind of mortgage you have and whether you want cash out.
The type of mortgage you have plays a major role in determining how soon you can refinance a mortgage after closing. You can typically refinance a conventional loan as soon as you want to, but you’ll have to wait six months to apply for a cash-out refinance. The wait to refinance an FHA, VA, or USDA loan ranges from six to 12 months.
Before any mortgage refinance, homeowners will want to ask themselves: What will the monthly and lifetime savings be? What are the closing costs, and how long will it take to recover them? If I’m pulling cash out, is the refinance worth it?
Key Points
• The timeline for when you can refinance a mortgage depends on the loan type and refinance purpose.
• Conventional loans can be refinanced anytime, but refinancing with the current lender may require a six-month wait.
• Cash-out refinances typically need at least a six-month waiting period.
• If you’re wondering how soon you can refinance an FHA mortgage, FHA loans mandate a 210-day wait for a Streamline Refinance.
• VA loans require a 210-day interval between refinances, with some lenders needing up to a year.
How Soon You Can Refinance Your Home by Mortgage Type
How soon after you buy a house can you refinance? The rules differ by home loan type and whether you’re aiming for a rate-and-term refinance or a cash-out refinance.
A rate-and-term refi will change your current mortgage’s interest rate, repayment term, or both. Cash-out refinancing replaces your current mortgage with a larger home loan, allowing you to take advantage of the equity you’ve built up in your home through your monthly principal payments and appreciation.
Here are more details about how soon after you buy a house you can refinance with different kinds of loans.
How Soon Can You Refinance a Conventional Loan?
If you have a conventional loan, a mortgage that is not insured by the federal government, you may refinance right after a home purchase or a previous refinance — but likely with a different lender.
Many lenders have a six-month “seasoning” period before a borrower can refinance with them. So you’ll probably have to wait if you want to refi with your current lender.
How Soon Can You Cash-Out Refinance?
Here’s how cash-out refinancing works: You apply for a new mortgage that will pay off your existing mortgage and give you a lump sum. A lower interest rate may be available at the same time.
How soon you can refinance your home with a cash-out refinance depends on the kind of loan, but you normally have to wait at least six months before refinancing a conventional mortgage. An FHA cash-out refinance requires that you have owned the home for at least one year and that your mortgage is at least six months old with a record of on-time payments. Getting a cash-out refinance on a VA loan involves a waiting period of 210 days from the closing date on the original mortgage or six months of on-time payments, whichever comes later.
How Soon Can You Refinance an FHA Loan?
An FHA Streamline Refinance reduces the time and documentation associated with a refinance, so you can get a lower rate faster. (That said, how soon you can refinance an FHA mortgage is still not as soon as with a conventional loan.)
You will have to wait 210 days (and make at least six on-time payments) before using a Streamline Refinance to replace your current mortgage.
How Soon Can You Refinance a VA Loan?
When it comes to VA loans, the Department of Veterans Affairs offers an Interest Rate Reduction Refinance Loan (IRRRL), also known as a “streamline” refinance.
It also offers a cash-out refinance for up to a 100% loan-to-value ratio, although lenders may not permit borrowing up to 100% of the home’s value.
How fast you can refinance a home loan from the VA is the same in both cases. The VA requires you to wait 210 days between each refinance or have made six on-time monthly payments, whichever comes later. Some lenders that issue VA loans have their own waiting period of up to 12 months. If so, another lender might let you refinance earlier.
How Soon Can You Refinance a USDA Loan?
The Streamlined-Assist refinance program provides USDA direct and guaranteed home loan borrowers with low or no equity the opportunity to refinance for more affordable payment terms.
Borrowers of USDA loans typically need to have had the loan for at least a year before refinancing. But a refinance of a USDA loan to a conventional loan may happen sooner.
How Soon Can You Refinance a Jumbo Loan?
You may be wondering, “When can I refinance my house if I have a jumbo loan?” For a jumbo loan, even a rate change of 0.50% may result in significant savings and a shorter time to break even.
Here’s the good news about how fast you can refinance a home loan that’s a jumbo loan: You can refinance your jumbo mortgage at any time if you find a lender willing to do so.
Top Reasons People Refinance a Mortgage
If you have sufficient equity in your home, typically at least 20%, you may apply for a refinance of your mortgage. Lenders will also look at your credit score, debt-to-income ratio, and employment.
If you have less than 20% equity but good credit — a minimum FICO® score of 670 — you may be able to refinance, although you may not receive the best rate available or you may be required to pay for mortgage insurance.
Remember, too, that home equity increased for many homeowners in recent years as home values rose. That’s attractive if you want to tap your equity with a cash-out refinance.
Here are some of the main reasons borrowers look to refinance.
Lower Interest Rate
For many homeowners, the point of refinancing is to switch to a loan with a lower rate. Just be sure to calculate your break-even point – the moment when the closing costs will have been recouped: To do this, divide the closing costs by the amount you’ll save in payments every month. For example, if your closing costs will be $5,000 and you’ll save $100 a month, it will take 50 months to break even and begin reaping the benefits of the refi.
Two points to remember if you’re considering a refi for this reason. First, if you purchased your home around 2020, it may be hard to capture a lower interest rate than you currently have, as rates then were particularly low compared to historical mortgage rates. And second: Closing costs can often be rolled into the loan or exchanged for an increased interest rate with a no-closing-cost refinance.
Shorten Loan Term
Refinancing from a 30-year mortgage to a 15-year loan usually saves you a substantial amount of loan interest, as this mortgage calculator shows. Or you might want to refi to a 20-year term, if you’re years into your mortgage already, since resetting to a new 30-year term may not pay off.
Reduce PMI
If you put down less than 20% on a conventional mortgage, you’re probably paying primate mortgage insurance (PMI) on the loan. This typically costs between 0.5% and 1.0% of the total loan amount annually, though it can be higher. When your mortgage balance is down to 78% of the home’s original value (or the loan reaches the halfway point of the term schedule) the lender will automatically cancel the insurance, and you can request to have it removed when the balance is down to 80%, but until then, you’re on the hook for these monthly payments. One potential way to get rid of or reduce them is to refinance. For this to be worth considering, rates will have to be lower and you’ll need to find a lender willing to let you refinance with less than 20% equity. But especially if your home has gone up in value, this may be a possibility.
FHA loans require a similar insurance payment, called mortgage insurance premiums. After the upfront fee you’ll pay at closing, you pay monthly installments on a charge that’s annually between 0.15% and 0.75% of your loan amount for 11 years or the life of your loan, depending on when you took out the loan and the size of your down payment. The only way to get rid of those fees early may be to sell your home or refinance the mortgage to a conventional loan once you have 20% equity in the home — in other words, when your new loan balance would be at least 20% less than your current home value.
Switch to an ARM or Fixed-Rate Loan
Depending on the rate environment and how long you expect to keep the mortgage or home, refinancing a fixed-rate mortgage to an adjustable-rate mortgage (ARM) with a low introductory rate could be a strategic move. Similarly, if you’re uncomfortable with unpredictable payments and want to lock in a stable rate, switching from an ARM to a fixed-rate loan may make sense.
The Takeaway
If you’ve been asking yourself, “When can I refinance my house?” the answer is that it depends. If it’s a conventional loan, whenever you want to, although probably not with the same lender if that’s within six months of closing. Otherwise, if you must bide your time before refinancing or you’re waiting for rates to drop, that gives you a lull to decide whether a traditional refinance or cash-out refi might suit your needs.
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
Do you need 20% equity to refinance?
Some lenders will allow you to refinance with less than 20% equity in your home, but you may not get the best available interest rate, or you may need to pay for private mortgage insurance. You’ll want to do the math to make sure you’re saving money with the refinance.
Does refinancing hurt your credit score?
There may be a temporary dip in your credit score after a refinance, but if refinancing helps you lower your monthly debts you may find that it is actually helpful to your credit score over the long term.
Should I refinance soon after buying a home?
How soon you can refinance your mortgage after closing is secondary to whether refinancing soon is a good idea. That will depend on your specific loan, how much you put down, whether rates have changed, and many other factors. You’ll also want to take into account both the advantages you hope to get from refinancing as well as the costs.
How do I know when to refinance my mortgage?
The time to think about refinancing your home is when the benefits of a refi outweigh potential costs (like closing costs). If you can get a significantly lower interest rate, switch to a more advantageous loan type, or access a sum you need from a cash-out refinance, for example, it may be worth looking into a refinance.
Can you refinance more than once in a year?
There’s no legal limit on how often you can refinance. However, lenders and loan types may require waiting periods which will limit how many times you can refinance in a year. And don’t forget that you’ll generally need to pay for closing costs each time, as well.
What documents are needed to refinance a mortgage?
Requirements will vary by lender, but typically you’ll need to have documents that establish your income (W-2s for the past two years and paystubs; 1099s and/or tax returns if you’re self-employed), records establishing your financial reserves (account statements, including investment accounts), proof of homeowners insurance, and the most recent monthly statement for any mortgages or home equity loans you have.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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