How soon you can refinance a mortgage will depend on the type of home loan and a few other factors. While some mortgages allow individuals to refinance home loans immediately, there may be a waiting period of at least six months for different types of loans, also known as “seasoning.”
💡 You can use our loan refinance calculator to see how much you can save if you choose to refinance one of your loans.
Refinancing Rules for Conventional Mortgages
Conventional mortgages are offered by private lenders such as banks, mortgage companies, and credit unions.
The waiting period is six months if you want to refinance your conventional mortgage through the same lender. If you change your mortgage lender you can refinance whenever you want.
The rules are slightly different for cash-out refinances, which allow you to convert your home equity into cash. You use your home as collateral and apply for a new loan that is more than your initial mortgage amount. The difference is paid to you in cash.
You must own your home for a minimum of six months before applying for a cash-out refinance.
Refinancing Rules for FHA Loans
A Federal Housing Administration or FHA loan is insured by the federal government. This home mortgage is issued by an approved bank and generally requires a lower down payment than a conventional mortgage.
There are two ways to refinance an FHA.
If you choose to refinance with another FHA loan, using the FHA Streamline Refinance process, you will have to wait until you have made six consecutive on-time payments, so a minimum of six months.
If you want a regular refinance with no cash out, there’s no waiting period but your maximum Loan-to-Value (LTV) ratio will be 85%, meaning that you may not be able to refinance the entire mortgage. If you wait a year, the maximum LTV is 97.5%.
If you want to refinance the FHA loan with a conventional loan, you’ll follow the rules for refinancing conventional mortgages, as explained above.
Refinancing Rules for VA Loans
A VA mortgage loan is available via a program established by the US Department of Veteran Affairs. The VA offers several refinance programs, all of which require a minimum of six on-time mortgage payments or 212 days, whichever is less.
If you refinance with a conventional mortgage you’ll follow conventional mortgage rules.
Refinancing Rules for USDA Loans
The US Department of Agriculture (USDA) offers two mortgage programs serving rural homeowners.
To refinance a guaranteed USDA loan you need to have made a minimum of 12 loan payments. There is no waiting period to refinance direct USDA loans.
Refinancing Rules for Jumbo Loans
A jumbo loan overshoots the financing limits set by the FHFA (Federal Housing Finance Agency). Jumbo loans will not be guaranteed by regulatory bodies such as Fannie Mae and Freddie Mac. Jumbo loans are provided to finance luxury properties in expensive real estate markets.
In terms of refinancing, jumbo loans are similar to conventional mortgages. They can be refinanced whenever a homeowner wishes to do so. As jumbo loans are not securitized, the underwriting process is quite comprehensive compared to other mortgage options discussed here. You will have to have good credit and a low debt-to-income ratio to be approved.
Why Should You Refinance Your Mortgage?
There are several reasons to refinance your mortgage.
- Reduce your interest rate. If your credit has improved or rates have gone down you may be able to refinance at a lower rate.
- Reduce your monthly payment. Refinancing with a longer term can reduce your monthly payment but will increase your interest costs.
- Reduce your loan repayment period. This will increase your monthly payment but reduce your interest expense.
- Change your mortgage type. You can shift from a fixed-rate mortgage to an adjustable-rate mortgage or vice versa.
- Remove a cosigner. If you have a cosigner on your original loan, refinancing can free your cosigner from their obligation.
Remember that refinancing involves considerable effort and you will pay closing costs. Be sure to consider those factors before deciding to refinance!