When Is it Too Fast to Refinance Your Mortgage?
If you’re of a certain age, then you have probably heard (or even used) the famous quote from the film, Ferris Bueller’s Day Off – “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”
And if you’re a homeowner, then you probably know all too well how fast life really moves. In fact, life moves so fast that some homeowners think about refinancing their mortgages not long after they’ve closed on their homes!
If you are one of these homeowners, or you just want to know how long should homeowners wait before refinancing a new mortgage, then this post will help shed some light on the topic. As you will see, the length of time a homeowner has to wait before they can be eligible to refinance all depends on the type of mortgage they currently have.
Earliest Refinancing Timelines for Conventional Loans
If your home mortgage is a conventional home loan, and you want a new loan at a new rate or a new term, then you can refinance your mortgage at any time. There is no waiting period for a standard refinance with a conventional loan. However, if you refinance this type of loan too early, it will most likely cost you.
The reason is because most lenders impose prepayment penalties on homeowners who pay off their home loans too soon after closing on them. The amount of the penalty is usually around 1% to 2% of the outstanding loan amount. This would mean on a $300,000 loan, you could wind up having to pay an additional $6,000 in prepayment penalties.
However, if you want a cash-out refinance, then you will need to wait a designated length of time to be eligible. Most lenders require you to have had your first loan for at least six months before you can apply for cash-out refinance.
Earliest Refinancing Timelines for FHA Loans
If your current mortgage is an FHA loan, then how early you can refinance depends on the type of refinance you’re interested in. If you just want a standard rate-and-term refinance, then you will need to wait at least 210 days from the date you closed on your original loan. But if you’re looking at a cash-out refinance, then you’ll need to wait 12 months. Over that time you will need to have lived in the home and have made on-time mortgage payments every single month.
Earliest Refinancing Timelines for VA Loans
If your mortgage is a VA loan, which is guaranteed by the Department of Veterans Affairs, and you want to refinance, then the earliest you will be able to refinance won’t be until 210 days after the due date on your first mortgage payment. You will also be required to have made at least six monthly mortgage payments and be current on your loan payments to be eligible.
Earliest Refinancing Timelines for USDA Loans
If you have a USDA home loan, then you will have one of the longest waiting periods before you can be eligible to refinance. With this type of loan, you are required to have had your mortgage for at least a full year before you can refinance. The year-long waiting period applies to all USDA loans, regardless of the specific type.
Other Considerations to Know Before You Refinance Early
The above waiting times are not the only things you need to consider if you want to refinance your home loan early. You also need to be aware that lenders can also have certain requirements that you will need to meet before you can qualify for a mortgage refinance.
It is also important to know that if you are planning on refinancing with the same mortgage lender who issued your original loan, then you can probably expect longer waiting periods and costly prepayment penalties. For these reasons, it is usually recommended to shop around and compare the refinancing products at multiple lenders first. You might be surprised to discover that the mortgage refinance rates, terms, eligibility requirements, and waiting periods can sometimes vary quite a bit between mortgage companies.
