Historically low mortgage rates have led many of my clients to ask, “when can I refinance my mortgage?”
It’s a valuable question since the primary reason homeowners refinance is to lower their current interest rate. Of course, there’s also the potential to do a cash-out refinance and put your home equity to use to pay down debt, home repairs, new construction, increase cash savings, or for a big life purchase like paying for college tuition.
Like most things related to homeownership, when you can refinance depends on a set of individual factors. For instance, the type of mortgage loan you currently have and the type of mortgage loan you’re refinancing to get will play a role.
DO YOU HAVE A CONVENTIONAL LOAN?
The federal government does not back conventional loans, but Fannie Mae or Freddie Mac can purchase them. Typically you have more flexibility when you refinance a conventional loan, so you can refinance almost immediately to lower your interest rate or shorten the term of your loan. Keep in mind many lenders have a six-month “seasoning period” before they allow a mortgage borrower to refinance with the same company.
As for a cash-out refinance, there is a six-month waiting period regardless of how long you’ve owned your home before tapping into your home’s equity. It’s a commonplace that you also have at least 20% percent equity in the home.
You don’t have to use the same mortgage lender for your refinance, and your new loan officer can check to see if your existing mortgage payoff, albeit rare these days, would include any prepayment penalties associated with refinancing.
GOVERNMENT-BACKED HOME LOANS
Mortgages backed by the federal government have different rules for when you can refinance. If you’re wondering when I can refinance my mortgage, you could have good news if you borrowed one of these loans.
These loans include those from the Federal Housing Authority (FHA), the U.S. Department of Veterans Affairs (VA), and the United States Department of Agriculture (USDA).
Government-backed loans provide the opportunity to use a Streamline Refinance, which depending on your existing mortgage, may offer the following benefits:
- Lenient minimum credit scores
- No income, employment, and asset verification
- No home appraisal
Talk about streamlined! However, if you’re looking to replace your original mortgage by refinancing, you will need to wait at least six months from the date you closed on that mortgage. Speak with a local mortgage professional for more information on how to refinance your government-backed home loan.
ARE YOU READY TO REFINANCE WITH THE BEST?
“When can I refinance my mortgage?” Well, it depends on a lot of factors, including who you partner with. If you have questions about refinancing your home loan, I’m ready to show you what’s possible. Reach out to me for customized refinancing solutions.