Depending on the type of loan you have, you may be eligible to refinance as soon as you close on your home. Even if your loan has a waiting period, you may be able to get around this condition by refinancing with another lender.
Home equity is the greatest driver of wealth in the United States — one that wouldn’t be possible for most without the help of a mortgage. But if you just closed on your property and are already regretting the terms of your current home loan, you’re probably looking for a way out.
The good news is that you don’t have to wait to get a better mortgage. For those wondering just how soon after buying a house can you refinance, read on to understand your options.
When you refinance, you exchange your current home loan for a new one. The conditions of your new mortgage will depend on the type of refinancing you choose.
This type of refinancing allows homeowners to replace the conditions of their mortgage with more favorable ones. In this instance, no money is advanced to the homeowner — only the interest rate, loan term length, or both are changed. This is a particularly good option for homeowners who are not able to make their current mortgage payments or who simply want to take advantage of lower interest rates.
If you want to unlock the equity in your home without selling or taking out a second mortgage, a cash-out refinance is an option for you.
Like a rate-and-term change refinance, a cash-out refinance pays off your previous mortgage and replaces it with a new one. Unlike a rate-and-term change, the homeowner takes out a new mortgage for more than they owe on their previous one. This balance is then advanced to the homeowner as cash to invest in their property or to use towards other expenses.
You don’t have to keep your mortgage until you pay it off. Refinancing is a valuable tool to help homeowners take control of their debt and make their greatest asset work for them. Here are some of the benefits of refinancing:
If interest rates dropped dramatically or your home equity peaked shortly after closing on your mortgage, you may wonder, “How soon after buying a house can you refinance?” Many lenders have a six-month rule that prohibits refinancing within that time frame.
However, an easy workaround for this rule is to refinance with a different lender than the one you used originally.
Your waiting period may depend on the type of home loan that you have. Below are the waiting periods for the most common types of loans. If you’re unsure of what kind of loan you have, speak to your mortgage officer to help understand the type and terms of your loan.
Refinancing is a smart decision for some but not all. Homeowners who recently closed on their mortgage might be hesitant to replace it with a new one, but if they can take advantage of any of the following benefits, it may be the right choice.
Related: What is a mortgage recast?
The opportunity to shorten a loan’s terms or lower its monthly payments is enticing, especially when you consider that most Americans’ most significant asset is their home, and the average mortgage typically amounts to a third of the people's income. If refinancing can make the pathway to debt-free ownership shorter and easier, everyone should do it — right?
Like all good things, the decision to refinance is not as simple as it might seem. Homeowners will have to weigh the potential benefits and costs of refinancing, especially if they recently closed on their mortgage. If you just bought a home and are wondering how soon you can refinance after buying a house, consider the following:
Related: How to buy down your mortgage rate
If you recently closed on your home and are already looking to refinance, you may be in luck. Refinancing doesn’t have to take months, even if your mortgage has a prohibitory period for refinancing — working with a new lender is an easy way around this condition.
But even if you can refinance, stop and ask yourself if you should. Refinancing isn’t the right choice for everyone.
For those who intend to stay in their home for a while and stand to shorten their loan terms without raising their monthly payments and those who can get lower payments by locking in a lower interest rate, refinancing may be the right choice. But if refinancing wouldn’t radically change your path to debt-free ownership, or if you’re planning on moving soon anyway, refinancing might not be worth the closing costs.
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