woman with dark brown hair sitting in kitchen puts her chin in her hands and looks at a computer screen to learn how soon she can refinance a home is You’ve probably seen quite a few ads or news indicating it is an excellent time to refinance because of the current low rates. Refinancing can be a smart financial move when it reduces monthly payments, lessens the duration of the loan, or grows your home equity faster. However, there is still an important question to ask, how soon after buying a property can, and should you, refinance?

    We’ve put together some tips to help you know when it’s the right time to refinance.

    What does it mean to refinance?

    Simply stated, to refinance is to replace your existing home loan with a new one. Here are a few reasons why you might want to consider refinancing:

    • You want reduced monthly payments either by lowering your interest rate or a longer-term loan (or both).
    • You’ve decided to pay off your mortgage quicker by shortening the terms.
    • You want to change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
    • You are in financial hardship, want to start home improvements, or make a major purchase in the near future, and you want to tap into your home equity.
    • You are now eligible for a better rate because your credit score improved.
    • You want to remove the private mortgage insurance (PMI) that came with the original loan.

    How soon after purchasing a home can you refinance?

    You may be surprised by how soon you can refinance after buying a home; however, it does depend on the refinance program. It may feel silly to refinance right after the whole purchase process, but in some instances, it can save you a lot of money over the life of the loan.

    We do recommend waiting at least six months before refinancing. Here are some refinance guidelines and time frames to consider:

    A cash-out refinance allows you to take out funds from your home’s equity. Considering you probably don’t have that much equity within six months, it makes sense to wait anyways.

    If you went into mortgage forbearance or had your initial loan restructured to permit skipping or temporarily reducing monthly payments, the requirement may be up to 24 months before you can refinance.

    If you want to refinance your FHA loan with an FHA Streamline Refinance, you’ll need to wait 210 days from the original closing day.

    Even a slightly lower rate can save you thousands of dollars over the life of your loan.

    How long do you plan to stay in your home?

    You will definitely want to consider the answer to this question before refinancing. Does it make sense financially to refinance in your situation?

    Like your original mortgage, refinancing requires an appraisal, an inspection, and closing costs (between 2% and 5% of the loan value). Will you stay in the home long enough to recoup those fees?

    Suppose your existing mortgage is $1,500 a month, and you’re considering refinancing. The refinancing fees have an estimated total of $4,800, but your monthly payment is expected to decrease by $200 a month. You would save $2,400 a year, but you’d only begin to see these savings two years after refinancing.

    Will you be in your home for at least those two years to reap the benefits? If the answer is yes, then refinancing might be a smart avenue for you. However, if the answer is no, then your potential savings might not cover the cost of refinancing. Before starting the process, do the math for your situation or contact our mortgage experts to help you decide if the time is right for a refinance.

    Is it the right time?

    Refinancing is very beneficial if the time is right for your situation. It can be a smooth, straightforward process when you work with a reputable, experienced lender.

    If you want to learn more about what the process is to refinance, ask any questions, or find out if it’s the right time for you, you can learn more here.

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