Are you ruminating about a refi? How long you must wait to refinance depends on the kind of mortgage you have and whether you want cash out.
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 refinancing 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 a six-month waiting period.
• 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.
Refinance Wait Time Based on Mortgage Type
How soon 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.
Conventional Loan Refinance Rules
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.
Cash-Out Refinance Rules
If you’re aiming for a cash-out refinance, you normally have to wait six months before refinancing, regardless of the type of mortgage you have.
FHA Loan Refinance Rules
An FHA Streamline Refinance reduces the time and documentation associated with a refinance, so you can get a lower rate faster.
But you will have to wait 210 days before using a Streamline Refinance to replace your current mortgage.
VA Loan Refinance Rules
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.
The VA requires you to wait 210 days between each refinance. 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.
USDA Loan Refinance Rules
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.
Jumbo Loan Refinance Rules
For a jumbo loan, even a rate change of 0.5% may result in significant savings and a shorter time to break even.
How soon can you refinance a jumbo loan? A borrower can refinance their jumbo mortgage at any time if they find a lender willing to do so.
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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.
Here are the main reasons borrowers look to refinance.
• Reduce the interest rate. Reduce the interest rate. Refinancing to a loan with a lower rate is the point of refinancing for most homeowners. Just calculate your break-even point, when the closing costs will have been recouped: Divide the closing costs by the amount to be saved every month. If 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 a refi. If you purchased your home around 2020, it may be hard to capture a lower interest rate than you currently have, as that was a particularly low time for historical mortgage rates.
• Shorten the loan term. Refinancing from a 30-year mortgage to a 15-year loan usually results in a substantial amount of loan interest saved, as this mortgage calculator shows. Or you may refi to a 20-year term. If you’re years into your mortgage, resetting to a new 30-year term may not pay off.
• Tap home equity. 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.
• Shed FHA mortgage insurance. In many cases, the only way to get rid of mortgage insurance premiums on an FHA loan is to sell your home or refinance the mortgage to a conventional loan when 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 adjustable-rate mortgage or from an ARM to a 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 ARM that has a low introductory rate, or an ARM to a fixed-rate loan, may make sense.
Mortgage rates are no longer at record lows. But they’re still pretty low by historical mortgage rate standards.
And rates are not the be-all, end-all. Home equity increased for many homeowners as home values rose. That’s attractive if you want to tap your equity with a cash-out refinance.
Closing costs can often be rolled into the loan or exchanged for an increased interest rate with a no-closing-cost refinance.
The Takeaway
How soon can you refinance? If it’s a conventional loan, whenever you want to, although probably not with the same lender within six months. Otherwise, if you must bide your time before refinancing or you’re waiting for rates to abate, 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.
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