How Soon Can You Refinance a Mortgage?

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While conventional mortgages often have minimum timeframes for rate-and-term refinances, you may have to wait several months to refinance other loan types. 

As experts anticipate interest rates to drop in the coming months, some homeowners may consider refinancing their mortgage to lower their monthly payments. But here’s the question: How soon can you refinance a mortgage? 

The answer depends on your home loan type. Those with a conventional loan can refinance almost immediately, while homeowners with a government-backed loan may have to wait before adjusting their rate or term. 

We spoke with mortgage lenders to breakdown the nitty-gritty of refinancing, including the minimum wait times for different types of loans. 

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How Soon Can You Refinance a Mortgage?

The minimum time frame for refinancing a mortgage depends on your current loan type. Here, we’ve broken down the wait times for the most popular mortgage types. 

How Do You Decide When to Refinance a Mortgage?

Most mortgage experts recommend refinancing mortgages when interest rates have dropped 1-2% from your current rate. So if you locked in a mortgage at 7% and interest rates are at 6%, refinancing might be a good idea. Additionally, if you’re struggling to maintain monthly payments, refinancing may put you in better financial standing. 

Jason Lerner, MBA, area manager at First Home Mortgage, says it’s not always that simple. For example, a homeowner close to paying off their mortgage may be better off paying their home loan as is, even if rates have dropped significantly. 

“A refinance would result in a longer term, which would result in them paying more interest over time,” Lerner says. 

He recommends homeowners take a more comprehensive look at their home loan and long-term financial needs. “Depending on the loan size, you might need more than a 1% drop before it makes sense to refinance,” he says. 

Another reason homeowners refinance is to tap into their home equity to pay for home renovations or eliminate high-interest debt. The most popular way to do this is cash-out refinancing, which replaces your original mortgage with a new one and provides you the difference in cash. 

Conventional Refinance

Conventional home loans are not backed by the government and are offered by private lenders. While there’s no set waiting period for a standard rate-and-term refinance, those looking to refinance with the same lender may encounter a six-month seasoning period. However, this requirement is waived if you refinance through a different lender, allowing for immediate action. 

A cash-out refinance, which involves borrowing more than the existing mortgage balance, typically requires a 12-month waiting period, though exceptions exist for inherited properties or those allocated through divorce proceedings.

Reed Letson, owner of Elevation Mortgage, warns homeowners to consider closing costs associated with refinancing a home loan, as they may “eat up any potential savings.” Closing costs are typically 2-6% of the total loan size. 

USDA Refinance

Here are the requirements for refinancing a USDA loan, according to the agency: 

• Only loans financed or guaranteed by USDA are eligible. 
• Existing loan must have closed 180 days prior to the request. 
• Fixed interest rate and 30-year term. 
• Borrowers must meet the applicable adjusted annual household income. 
• No cash-out from collateral equity. Only reimbursement of borrower prepaid eligible closing costs and/ or refund from escrow overage. 
• Borrowers must occupy the property. 
• Properties located in areas now deemed ineligible remain eligible for refinance. 
• Existing leveraged loans or subordinate liens must be paid in full or be subordinated. 

Backed by the United States Department of Agriculture, USDA loans are designed to help low-income homebuyers in rural areas. 

Jumbo Loan Refinance

Jumbo loan refinancing rules vary by lender and there are no standard seasoning windows. Most lenders allow refinancing once you have sufficient equity, typically requiring an 80% loan-to-value ratio or less.

Jumbo loans are nonconforming mortgages exceeding Federal Housing Finance Agency loan limits, used for properties too expensive for conventional loans.

VA Loan Refinance

The waiting time for refinancing a VA loan depends on the type of refinancing: 

• Cash-out: Generally, you must wait 210 days after the first mortgage payment and have made at least six on-time payments, Letson says, though some lenders may require seven payments and a 240-day seasoning period. This process refinances the mortgage for more than the current loan balance, allowing the borrower to take part of the home equity in cash.
• Interest rate reduction refinancing loan (IRRRL): VA lenders usually consider your loan seasoned after 210 days and six consecutive payments. Still, borrowers with on-time payments can refinance between eight and nine months after their mortgage starts. This process enables seamless refinancing to a lower interest rate or converting an adjustable-rate mortgage to a fixed-rate mortgage without a home appraisal. 

“Remember to look at your VA Funding fee, as this can range from .5% for IRRRLs to 3.3% for cash-out,” Letson adds. 

A VA loan is a type of home loan that’s only available for U.S. veterans through the U.S. Department of Veterans Affairs. 

FHA Loan Refinance

• FHA simple refinance: No waiting period. This is a rate and term refinance of an existing FHA mortgage where you can add the closing costs to the loan amount.
• FHA streamline: To qualify, at least 210 days must have passed since your FHA loan closing and six months since your first payment due date. Allows existing FHA loan borrowers to efficiently capitalize on low rates by quickly refinancing their loans. 
• Cash-out: Borrowers can refinance existing loans and cash out the remaining equity. However, they must allow a six-month seasoning (waiting) period.
• Rate-and-term and simple refinance: No waiting period. This is a “no cash-out” refinance for an existing FHA mortgage, in which the proceeds are used solely to pay off current mortgage liens and associated refinancing costs. 

FHA loans are insured by the Federal Housing Administration (FHA). They are designed to help low-income, first-time homebuyers and those unqualified for conventional loans due to lower credit scores.

“If you are doing an FHA loan, remember the upfront Mortgage Insurance Premium rate is 1.75% of the base loan amount,” Letson says. 

When Can I Refinance My Mortgage? 

• The minimum time to refinance varies depending on your loan type.
• Conventional loans typically have the shortest waiting period, while government-backed loans like FHA, USDA and VA have stricter guidelines.
• The benefits of refinancing include lower interest rates, reduced monthly payments and access to home equity.

Why You Should Trust Us

Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his New York City economy coverage. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.

For this story, we worked with Reed Letson, a mortgage broker and owner of Elevation Mortgage in Colorado, and Jason Lerner, an area manager for First Home Mortgage and a 22-year mortgage industry veteran.

Mortgage Refinancing: Timeframes and Considerations

The minimum time frame for refinancing depends on your loan type. Conventional loans usually have the shortest waiting period, while government-backed loans like FHA, USDA and VA have stricter guidelines. Before you decide to refinance, consider factors such as current mortgage rates, closing costs and how it might impact your credit score. Weigh the pros and cons and determine if refinancing is right for you.

Frequently Asked Questions 

Sources

• Jason Lerner, area manager for First Home Mortgage and a 22-year veteran of the mortgage industry
• Reed Letson, owner of Elevation Mortgage 
• U.S. Department of Agriculture, “Refinance Options For Section 502 Direct And Guaranteed Loans,” https://www.rd.usda.gov/media/file/download/rd-sfh-refinancematrix.pdf