How Long After Buying a House Can You Refinance?

Written By Scott Kessman
Last updated July 21, 2021

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July 21, 2021

Simple. Thrifty. Living.

If you’ve just purchased your home recently, you may be wondering how long after buying a house can you refinance? And, is refinancing the right thing to do at this time? Your mortgage payment is probably your largest monthly expense. Not everyone who purchases a home has the luxury of waiting until they have saved up enough for a large down payment or until mortgage rates are lower.

These situations often result in a higher monthly payment. However, the good news is that you don’t have to stay stuck with a large mortgage payment throughout the entire length of the loan. When mortgage rates drop, you can refinance and lower your monthly payment significantly.

When mortgage rates drop, you may see a lot of advertisements saying that now is an excellent time to refinance. But that isn’t always true for everyone. Additionally, choosing the wrong company to refinance your loan can end up costing you thousands in unnecessary expenses.

The simple definition of refinancing is that you are replacing your current loan with a new one. That means you may not have the same mortgage company with a refinanced loan, and the terms might also be different. To know if refinancing is the right move, consider the following scenarios:

  • You want to lower your monthly payments by refinancing with a lower interest rate.
  • Removal of the private mortgage insurance (PMI) from your current loan.
  • You currently have an adjustable-rate mortgage (ARM) loan and would like to switch to a loan with a fixed rate.
  • Paying off your loan quicker with a shorter-term loan.

These are some of the most common reasons for refinancing loans. Some less common reasons may include:

  • Refinancing so that you can get some cashback from your equity for the purpose of paying off another loan, making home improvements, paying medical bills, or making a major purchase.
  • You are eligible for a better interest rate after improving your credit rating.
  • You’ve gotten divorced or married and want to add or remove someone from the loan.

If any of the above situations apply to you, then it might be a good time to refinance. Of course, other criteria must also be considered, such as the current mortgage rate.

So, if you have recently purchased your home but feel it would be a good time to refinance, you’ll want to know if there are any limitations or restrictions for doing so within a specific time period. It actually depends on a variety of things, such as what type of loan you are looking for, what type of refinance program you are interested in, and if there will be any penalties. Sometimes, refinancing even just a few months after your initial closing on a home can save you a lot of money. But if there are penalties for refinancing so quickly, it might not be worth it.

How long after buying a home can you refinance might also depend on the lender you’ve chosen. Some might require you to wait for a specific amount of time before you can refinance with the same company.

It also helps to know what type of refinance program would be most suitable. Additionally, these will also determine how soon you can refinance a home after purchase. For example, a cash-out refinance normally requires that you wait at least six months after you’ve bought your home. With a cash-out refinance, you are borrowing against the equity of your home.

This type of refinancing is ideal if you need cash for a major home repair or a large purchase. However, since six months isn’t a very long time to build up equity, it isn’t commonplace to seek a cash-out refinance so quickly.

There are different waiting periods for FHA loans. If your original loan was an FHA loan, you are eligible for an FHA Streamline Refinance. The waiting period for this is 210 days from the original closing date.

Even if you have a standard, fixed-rate loan, it may be worthwhile to refinance if the mortgage rates drop. A significant drop can potentially save you hundreds each month. You’ll need to check with your lender to see if there are any waiting period requirements or penalties for refinancing quickly. Some lenders and loan products have a penalty for refinancing even within three to five years of the original closing.

Many people who jump at the idea of refinancing often don’t take the time to think of one important consideration: How long they plan to stay in the home. You need to think about this because most refinancing programs cost money—almost as much or the same amount as a regular closing. You might even need to get appraisals and inspections again, depending on the lender.

Even though a refinance could save you money in the long run, the closing costs could be significant. If you aren’t planning on staying in your home for at least another three to five years, you may not recoup the closing costs.

Typically, you can recoup the closing costs for a refinance after two to three years. You’ll have to do some calculations based on your own rates and monetary amounts to see if a refinance is worth it or not.

When you first apply for a mortgage and get a loan, it affects your credit score. If you refinance and apply for another loan soon after, it could affect your credit score negatively. That’s because you may not have had enough time to boost your score by making regular monthly mortgage payments. If your credit score was in good shape, this may be nothing to worry about. But if your credit score was rather low, it could make it more difficult to get favorable terms to refinance so soon.

As you can see, how long after buying a house can you refinance depends on several factors, as well as your own situation. Ultimately, you will need to decide if the savings or the improvement in your mortgage terms is worth the cost. Take the time to think about it, research the different options and lenders available to you, and make an informed decision.

About the Author

Scott Kessman

I possess a strong 20-year background in marketing, digital marketing, and advertising. However, writing has always been a true passion of mine, and after working in corporate offices for many years, I turned my passion for writing into a full-time job. As a contract content writer for the last 12 years, I can craft engaging and informative content about a wide variety of subjects. I have also written and published two fantasy novels and a collection of short stories.

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