How Soon Can You Refinance a Mortgage? Key Timelines to Know

Q: How soon can I refinance my conventional mortgage?

If you're considering a cash-out refinance , the waiting period can vary. While some local banks or credit unions may require only six months if they don't sell loans on the secondary market, Fannie Mae and Freddie Mac now mandate a 12-month waiting period.

How soon you can refinance your mortgage depends on your loan type — some have wait times. Refinancing early may incur costs like prepayment penalties, but savings through lower interest rates may make it worthwhile.

By Zachary Romeo, CBCA

Reviewed by Ramsey Coulter

Edited by Jonathan Ramos

Updated: December 12, 2024

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When considering how soon you can refinance a mortgage, the timing largely depends on your loan type and the kind of refinance you need. While some mortgages allow immediate refinancing, others require a waiting period, often called "seasoning."

You can generally refinance at any time, but specific scenarios, like cash-out refinances, may demand a waiting period of six months to two years. Understanding these timelines is vital to determining whether refinancing aligns with your financial goals.

Key Takeaways

You can generally refinance your mortgage anytime, but specific loans may require waiting periods, such as 210 days for FHA streamline refinances.

Before refinancing early, consider the potential savings versus costs and how long you plan to stay in your home.

Refinancing early can be beneficial when interest rates drop significantly or when you need to remove a co-signer from your mortgage.

How Soon Can I Refinance My Mortgage?

When thinking about how quickly you can refinance a mortgage, it's essential to know that while refinancing is generally possible at any time, certain loans have specific waiting periods. These timelines, often tied to your loan type and the refinancing you want, can affect when you're eligible to refinance.

Understanding these requirements is key to ensuring your refinancing efforts align with your financial plans. Let's look at how these timelines vary across different types of loans.

1
Conventional Loans
You can usually refinance a conventional loan immediately, but cash-out refinances now require a 12-month seasoning period, extended from the previous six-month requirement. This waiting period allows lenders to ensure the property’s value has stabilized before approving the new loans.
2
FHA Loans
Federal Housing Authority (FHA) loans allow streamlined refinances with no waiting period, provided your mortgage is current and 210 days have passed since your last closing. For a cash-out refinance, you must wait at least 12 months to ensure you’ve built enough equity in your home.
3
VA Loans
Home loans backed by the Department of Veterans Affairs (VA) often allow interest rate reduction refinances (IRRRL) without any waiting period. However, some lenders may have seasoning requirements if you’re considering a cash-out refinance.
4
USDA Loans
Loans from the U.S. Department of Agriculture (USDA) generally require a 12-month waiting period before refinancing, especially if you want to lower your interest rate or change your loan terms. This period helps verify that the property still qualifies under USDA guidelines.
5
Jumbo Loans
Refinancing jumbo loans varies by lender, but many follow guidelines similar to conventional loans, requiring a six-month waiting period for cash-out refinances. Due to their larger amounts, these loans may have stricter conditions.

WHAT IS SEASONING?

Seasoning refers to the minimum time you must wait after obtaining a loan before you can refinance it. Lenders require this period, typically six months to two years, to ensure your mortgage is stable.

Seasoning is especially relevant for cash-out refinances, where equity and payment history are crucial for loan approval. Understanding seasoning helps you plan when to refinance effectively.

Pros and Cons of Early Refinancing

Refinancing early can lower your monthly payments and lead to higher overall costs due to extended loan terms. Weighing the benefits and risks will help you determine if an early refinance is the right move. Here’s a closer look at the pros and cons.

Pros	Cons
Lower Monthly Payments: Refinancing into a longer-term loan can reduce monthly payments, improving cash flow.	Increased Total Interest: Extending your loan term (a possibility but not a necessity when refinancing) can lead to paying more interest over time, raising the overall cost.
Remove Mortgage Insurance: Refinancing can eliminate private mortgage insurance if your home’s value has increased or you can make a larger down payment.	Potential Prepayment Penalties: Some loans charge penalties for refinancing too soon, adding extra costs to your new mortgage.
Lock in a Lower Rate: Early refinancing can secure a lower interest rate, potentially saving you money over the life of the loan.	Equity Reduction: Cash-out refinancing reduces your home equity, limiting your future financial options.
Access Home Equity: A cash-out refinance allows you to tap into your home’s equity for expenses like home improvements.	Impact on Credit Score: Refinancing can temporarily lower your credit score due to the hard inquiry and new debt.
Adjust Co-Signers: Refinancing lets you add or remove a co-signer, which is helpful after major life changes like marriage or divorce.	Closing Costs: Refinancing early means paying new closing costs, which could outweigh the benefits if you haven't had your current loan for long.

LOAN MODIFICATION VS. REFINANCE: WHAT’S THE DIFFERENCE?

The key difference between loan modification vs. refinance is purpose. A loan modification adjusts the terms of your existing mortgage to make payments more affordable, often during financial hardship. Refinancing involves getting a mortgage to replace your current one, usually to lower your interest rate, change the loan term or access equity.

Refinancing is often a choice, while loan modification is typically for borrowers struggling to keep up with payments.

Factors Influencing Refinancing Eligibility

Before pursuing an early refinance, consider how quickly you can refinance a mortgage without incurring penalties or higher costs. Ignoring factors like closing costs or your loan’s interest rate could negate the benefits of refinancing.

Understanding these considerations ensures that refinancing early aligns with your financial goals. Below are key factors to review before deciding.

Will the savings outweigh the costs?

Consider closing costs and prepayment penalties. If the expenses exceed potential savings, refinancing early might not be worthwhile.

Is my credit score strong enough?

A lower score could mean higher interest rates, reducing the benefits of refinancing. Make sure your credit score supports favorable terms.

How long do I plan to stay?

If you plan to move soon, the upfront refinancing costs may not be recouped, making it less beneficial.

How much equity have I built?

Limited equity may affect your eligibility for certain refinancing options, like cash-out refinancing, impacting your financial goals.

Can I handle extending my loan term?

Extending your mortgage could lower monthly payments but may result in higher overall interest costs, making it crucial to weigh short-term relief against long-term financial impact.

When to Refinance Your Mortgage

Timing your refinance can significantly impact its benefits. Different scenarios, such as interest rate changes, home value appreciation or financial goals, determine whether refinancing early makes sense. Evaluating these factors can help you decide the best moment to refinance. Let’s explore situations where refinancing may or may not be a good idea.

A Timely Opportunity

The Situation: Three years ago, Sarah secured a 30-year fixed mortgage when interest rates were higher. Recently, rates have dropped significantly, prompting her to consider refinancing early. Since her mortgage doesn’t have prepayment penalties, she’s eager to explore her options.

Our Analysis: Refinancing now could save Sarah thousands over the life of her loan by reducing her interest rate. Given the significant drop in rates and her long-term plans to stay in the home, an early refinance is likely a smart move.

A Recent Mortgage

The Situation: John recently purchased his dream home and secured a 30-year fixed mortgage six months ago. He’s noticed a slight dip in interest rates and is tempted to refinance early. However, John’s mortgage includes prepayment penalties for refinancing within the first year.

Our Analysis: Given the costs of these penalties and the short time he’s had the loan, refinancing now would likely be more expensive than beneficial. Waiting until penalties no longer apply may be a smarter choice for John.

Tapping into Equity

The Situation: Lisa has owned her home for five years and has built significant equity as property values in her area have risen. She’s considering an early refinance to tap into this equity for a home renovation project she’s been planning.

Our Analysis: With ample equity and no prepayment penalties, refinancing now could provide Lisa with the funds she needs while keeping her interest rate favorable. Given her plans and the financial benefits, an early refinance appears to be a smart decision.

Minimal Rate Drop

The Situation: Emily refinanced her mortgage a year ago, securing a fixed rate she was happy with at the time. Recently, she noticed a slight drop in interest rates and is debating whether to refinance again to capitalize on the decrease.

Our Analysis: However, the difference in rates is minimal, and refinancing again so soon could result in high closing costs with little overall savings. In Emily’s case, the benefits of an early refinance might not justify the expenses, making it better to hold off.

Removing a Co-Signer

The Situation: Tom bought his home with his brother as a co-signer, but now that his financial situation has improved, he wants to remove his brother from the mortgage. Tom is considering an early refinance to take full ownership of the loan.

Our Analysis: With stable income, solid credit and no prepayment penalties, refinancing early to remove the co-signer makes sense for Tom. This move will give him full control over the property and the mortgage, aligning with his current financial goals.

FAQ: How Soon You Can Refinance Your Mortgage

Refinancing your mortgage early can raise several questions, especially since the timing and benefits can vary depending on your situation. Homeowners often wonder about the right moment to refinance, the impact on their finances and any potential drawbacks. We’ve addressed frequently asked questions about how soon you can refinance a mortgage.

How soon can you refinance an FHA loan?

You can refinance an FHA loan as soon as you’ve made six monthly payments and at least 210 days have passed since your last closing.

How soon can I refinance my conventional mortgage?

If you're considering a cash-out refinance, the waiting period can vary. While some local banks or credit unions may require only six months if they don't sell loans on the secondary market, Fannie Mae and Freddie Mac now mandate a 12-month waiting period.

How soon can you refinance a VA loan?

You can refinance a VA loan with an Interest Rate Reduction Refinance Loan (IRRRL) immediately, but lenders might require at least six months of payments for a cash-out refinance.

How soon can you refinance a USDA loan?

USDA loans generally require a 12-month waiting period before you can refinance, often with a focus on lowering your interest rate or changing your loan term.

Should I refinance my mortgage to pay off debt?

Refinancing to pay off debt can be a good option if it reduces your interest rate and monthly payments. However, you’re converting unsecured debt into secured debt, risking foreclosure if you can’t make payments.

Should I pay off my mortgage or refinance?

Paying off your mortgage can save you interest, but refinancing might offer better terms or free up cash. The decision depends on your financial goals and current interest rates.

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