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How soon can you refinance a mortgage?

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    Refinancing your mortgage typically means replacing your mortgage with a new one, under different terms. Your lender typically “pays off” your current mortgage with the new mortgage, and that new mortgage and its terms are what you pay moving forward.

    You may have taken out a mortgage with the hopes of refinancing for a better rate or are simply wondering what refinancing might mean for you. Life is all about timing, so when exactly is the greenlight for that opportunity?

    Options for refinancing your home

    There are a few different ways to refinance a home, but it may depend on the type of mortgage you have, the current value of your property and how long you’ve had it for. Whether you’re looking to refinance a conventional loan, FHA loan or VA loan, here are a few common approaches:

    • A rate-and-term refinance, described above, is when you replace your current loan for one with potentially better interest rates or more or less time to pay off the loan.
    • A cash-out refinance allows you to use your home equity to take out a larger loan. You essentially “pay off” and replace your previous mortgage and use the extra money toward other home projects, to consolidate debt, or even to fund school/college tuition.

    Why you might want to refinance your home

    There are a few different reasons why people choose to refinance their mortgages. The four most common reasons are:

    • Get a lower interest rate
    • Shortened repayment terms
    • Leverage or use home equity
    • Change your adjustable-rate mortgage (ARM) to a fixed-rate mortgage to lock in an interest rate.

    Or, at times, you may desire a mix of them. However, refinancing doesn’t necessarily mean that you’ll definitely get a better interest rate or the exact payment terms you’ve set out for. Also note that refinancing typically comes with closing costs, just like any other mortgage.

    When can you refinance your home?

    The timeline for refinancing will depend on your lender and the type of mortgage you have. Some mortgages allow you to refinance right away, while others require a “seasoning” period. Seasoning is the amount of time the home has been owned and/or the mortgage has been active.

    How soon can you refinance a conventional loan?

    Conventional loans are one of the most common types of loans. With conventional loans, you’re often allowed to refinance right away. If not, the seasoning period is typically about six months. The seasoning period is common among cash out refinances, which allows you to tap into home equity for a larger mortgage.

    How soon can you refinance an FHA loan?

    FHA loans are backed by the Federal Housing Administration and have lower credit and down payment requirements. There are a few different ways you can refinance a FHA loan, and each comes with its own timeline:

    • Cash-out refinance: Those who want a cash-out refinance will need to show 12 months of ownership, occupancy and on-time mortgage payments. Note there may be other qualifications for this type of refinancing.
    • Rate-and-term: When someone may qualify for rate-and-term refinancing may depend on the time they’ve lived in the home.
    • Adjustable to fixed-rate: Timelines and qualifications for adjustable-to-fixed-rate refinances may vary depending on the lender.

    How soon can you refinance a VA loan?

    VA loans are mortgages backed by the U.S. Department of Veterans Affairs, made for current service members, veterans and certain surviving spouses. The most common type of VA refinance is called an interest rate reduction refinance loan (IRRRL) which is refinancing your current VA refinance to a new VA loan and requires six months of timely payments.

    How soon can you refinance a USDA loan?

    The U.S. Department of Agriculture offers USDA loans to people living in designated rural communities. When it comes to refinancing a USDA home loan, the borrower typically must wait a year before making a request and be current for the last 180 days.

    In summary

    For some mortgages there is no seasoning period between taking out a mortgage and refinancing, and others have more stringent requirements. Always be sure to check with your home lending advisor to help assist with any questions you might have regarding your specific loan’s refinancing options.

    Take the first step and get preapproved.

    Have questions? Connect with a home lending expert today!

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