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How Soon Can I Refinance My Mortgage?

Updated
Maurie Backman
Kristi Waterworth
By: Maurie Backman and Kristi Waterworth

Our Mortgages Experts

Ashley Maready
Check IconFact Checked Ashley Maready
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The lower your interest rate on your mortgage, the more affordable your home becomes. If you didn't qualify for the best mortgage rate when you first got a home loan, then refinancing may be worthwhile. It may also pay to refinance to take cash out if your home has had a substantial equity gain.

Refinancing lets you swap one mortgage loan for another, albeit at a lower rate. And your associated savings could be substantial.

But what if you only recently closed on your mortgage? Can you refinance right away, or will you need to wait? Read on to learn more about when refinancing makes sense.

When should you consider refinancing?

There's no preset number of times you're allowed to refinance; you can do so as many times as it makes sense given your financial situation. However, if you've recently signed your mortgage, you may need to wait a bit as generally, your existing lender won't let you refinance in the first six months. That said, some lenders will waive that waiting period, so if rates have dropped significantly since you closed on your home, or your credit score has improved tremendously, it pays to contact your lender and see whether refinancing is possible.

Another option is to refinance with a different mortgage lender. Many lenders will let you refinance even if you recently signed your mortgage with another company. You're more likely to snag a great offer if you shop around to find the best mortgage refinance lenders.

If you're interested in a cash-out refinance, you'll generally need to wait at least six months from when you originally closed on your mortgage, regardless of whether you're using the same lender or a different lender. With a cash-out refinance, you borrow more money than what you owe on your existing mortgage. You can then use that cash for any purpose -- home improvements, paying down debt, or even taking a vacation.

If you want to refinance an FHA loan with an FHA Streamline Refinance (a program in which your original FHA loan paperwork is used to process your refinance, thereby expediting the process), you'll be subject to a 210-day waiting period. Also, if your original mortgage was already modified to make your payments more affordable, you may need to wait up to two years to refinance it.

Does it pay to refinance soon after closing on a mortgage?

When you refinance, you're subject to closing costs in the same way as when you sign an original mortgage. If you refinance too often, you'll keep paying those closing costs. But in some cases, it may be worth it.

Imagine your credit score has improved in recent months, while mortgage rates have fallen simultaneously. If you're able to lower your interest rate by a full percentage point or more, then it could easily pay to refinance -- even once you've covered those closing costs.

It could also pay to refinance shortly after closing on a mortgage if your home value has climbed substantially since you finalized that loan and refinancing allows you to get rid of your private mortgage insurance.

Ultimately, though, you'll need to make sure you plan to stay in your home long enough to reap the benefits of a mortgage refinance. If your refinance costs you $4,000, but you're able to lower your monthly mortgage payment by $200 a month, it will take you 20 months to break even. If you're confident you'll be staying in your home for another 29 years until your mortgage is paid off, then refinancing makes sense, because you'll come out way ahead financially in the long run.

Don't rush to refinance

Tempting as it may be to refinance soon after closing on your mortgage, make sure you're doing it for the right reasons. Don't chase small interest rate drops -- if refinancing means going from a rate of 3.755% to 3.50%, it's probably not worth it. But if you can go from 7.9% to 7.0%, that could be worth the effort. Regardless of the rates when you're considering refinancing, wait until you have a chance to capitalize on a substantial rate reduction before applying to refinance.

Still have questions?

Here are some other questions we've answered:

How much might I save by refinancing?
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The Ascent's best mortgage refinance lenders

Refinancing your mortgage could save you hundreds of dollars for your monthly mortgage payment and secure you tens of thousands of dollars in long-term savings. Our experts have reviewed the most popular mortgage refinance companies to find the best options. Some of our experts have even used these lenders themselves to cut their costs.

FAQs

  • Many borrowers refinance their mortgages in order to cash out all or some of the equity they've accumulated for expenses like home improvement projects. But others may do so to decrease their term, for example, if they were getting close to retirement and didn't want a mortgage hanging over their heads, or to remove mortgage insurance before it would naturally come off the loan, like when equity has increased rapidly in a short period.

  • Yes! Sometimes, getting rid of your mortgage insurance (or moving into a different loan type with less expensive mortgage insurance) will save you far more than you'd pay in the difference in interest. In this instance, it's definitely better to refinance, even if you're paying a higher rate.

  • It's a difficult choice sometimes between refinancing or getting a second mortgage. When you talk to your lender, ask what the cost of each would be for the lifetime of the loans. If your primary mortgage has a very low interest rate, even if your second is at a much higher rate, you may still beat the current mortgage rates with the blended (combined) mortgage rate.

Our Mortgages Experts