How Soon Can You Refinance a Mortgage? - NerdWallet (2024)

FAQs

How fast can you refinance after getting a mortgage? ›

In many cases, there's no waiting period to refinance. Your current lender might ask you to wait six months between loans, but you're free to simply refinance with a different lender instead. However, you must wait six months after your most recent closing (usually 180 days) to refinance if you're taking cash out.

In most cases, you may refinance a conventional loan as soon as you want. You might have to wait six months before you can refinance with the same lender. But that doesn't stop you from refinancing with a different lender.

There is nothing wrong with choosing to refinance from 15-year to 30-year loan terms. Taking this step can help reduce monthly payments and provide some financial flexibility. Plus, you can always refinance back into a 15-year mortgage.

Refinancing will hurt your credit score a bit initially, but might actually help in the long run. Refinancing can significantly lower your debt amount and/or your monthly payment, and lenders like to see both of those. Your score will typically dip a few points, but it can bounce back within a few months.

You may end up in more debt

And if you plan on refinancing so you can pay off high-interest debt, have a clear plan to avoid overspending in the future: “One of the downfalls that I've seen is that folks will have all of this new disposable income, from a lower rate and/or longer terms,” says English.

You could face a prepayment penalty.

Some lenders charge you a hefty fee — known as a prepayment penalty — if you pay off your loan in the first few years of borrowing it. Your new loan pays off your old mortgage when you refinance, so if that would trigger a penalty, you'll pay more than expected for your refi.

Conventional loans – you can do a rate-and-term refinance right away if you want, but typically not with the same lender. That's because, before 6-months, the lender may lose their original commission. On the other hand, if you want a cash-out to refinance, you'll have to wait for at least 6-months.

As a rule of thumb, experts often say that it's not usually worth it to refinance unless your interest rate drops by at least 0.5% to 1%. But that may not be true for everyone.

Expert predictions for mortgage rates in 2024

In Fannie Mae's latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. Even though national average rates have gone up over the past few weeks, Fannie Mae's forecast for Q4 2024 hasn't changed.

Do you need a down payment to refinance? ›

Key takeaways

You don't need a down payment to refinance, but you'll likely have to come up with cash for closing costs. Some lenders let you roll closing costs into the mortgage to avoid upfront expenses. You can also try negotiating with the lender to waive them.

FHA loans require borrowers to pay mortgage insurance premiums (MIPs) at closing and throughout the life of the loan. Specifically, you'll pay 1.75% of the loan amount at closing as your upfront MIP. Then, you'll pay MIPs of 0.15% to 0.75% of the loan amount every year.

Refinancing swaps your current loan with a new one. You could get a lower interest rate and shorter or longer term than you currently have. But opting for a longer repayment period on a new loan could make you feel like you're starting from scratch. Most consumers refinance to save money.

Refinancing your mortgage does not have to negatively impact your home equity. Just the opposite, in fact: The goal of a refi generally is to get a new loan with lower interest rates, making repayments easier and allowing you to build equity faster.

While mortgages can be refinanced immediately in certain cases, you typically must wait at least six months before seeking a cash-out refinance on your home, and refinancing some mortgages requires waiting as long as two years.

Generally, you can sell your house at any time. You are free to do so shortly after you purchase it. But before you rush to put up that “For Sale” sign, consider the varied implications, including financial and market conditions.

When you refinance, you are required to pay closing costs like those you paid when you initially purchased your home. The average closing costs on a refinance are approximately $5,000, but the size of your loan and the state and county where you live will play big roles in how much you pay.

Refinance closing costs commonly run between 2% and 6% of the loan principal. For example, if you're refinancing a $225,000 mortgage balance, you can expect to pay between $4,500 and $13,500. Like purchase loans, mortgage refinancing carries standard fees, such as origination fees and multiple third-party charges.