How soon you can refinance your mortgage depends on your loan type and lender’s requirements. Some mortgage programs allow you to refinance immediately, while others require a waiting period or have additional rules.
If you recently got your mortgage and are less than thrilled about the interest rate or other terms, you may be looking to refinance as quickly as possible. While refinancing your mortgage can potentially improve your loan terms and save money, it comes with costs. And with current interest rates at elevated levels compared to recent years, moving to a lower-rate mortgage may be challenging.
However, other factors may warrant a refinance, such as a change in financial circ*mstances or accessing home equity. Before refinancing your mortgage, familiarize yourself with the waiting timelines, benefits, drawbacks and costs.
Timeline to refinancing a mortgage
How quickly you can refinance your mortgage varies by loan program and lender. Refinancing conventional mortgages (non-government loans) may take less time and have fewer requirements than refinancing FHA loans or other government-insured mortgages. However, some federal loan programs offer streamlined refinances that fast-track the refinance process.
In addition to observing waiting periods, you may have to meet minimum income and credit requirements and a maximum loan-to-value (LTV) ratio — your mortgage balance compared to your home’s value. You can estimate your LTV ratio (using Fannie Mae’s free calculator) to see if you have enough equity in your home to refinance. Lenders typically restrict eligibility to borrowers who have at least 20% equity.
Refinancing a modified loan or one in a forbearance program may have additional guidelines. Once you’ve met your loan requirements and entered the underwriting process, closing on a refinance loan can take 30 to 60 days, but the true timeline varies.
| Loan type | How soon you can refinance | Fine print |
|---|---|---|
Conventional | Any time for a rate-and-term refinance; after 12 months for a cash-out refinance that pays off an existing loan (some exceptions apply). | You must be on the home title for at least six months for a cash-out refinance (some exceptions apply). |
FHA | Any time for a simple or rate-and-term refinance; after seven months for a streamlined refinance; after 12 months for a cash-out refinance (can vary by lender). | You must have made on-time payments for the past six months; 12 months for a cash-out refinance. |
VA | After 210 days from the original closing. | You must have made at least six consecutive monthly payments on the current loan. |
USDA | After 12 months from the original closing. | You must be current on the loan for the past six months — in some cases, 12 months. |
Jumbo | Any time, depending on the lender. | Requirements vary by lender. |
Refinancing conventional loans
Conventional loans are mortgages that aren’t part of a federal loan program, such as FHA, VA or USDA loans. Refinancing conventional loans has few restrictions as long as the loan meets the necessary LTV requirements. In most cases, you may be able to refinance immediately — even days after getting the initial loan. However, some mortgage refinance lenders may impose a waiting time frame, called a seasoning period, before allowing a refinance.
Cash-out refinances, in which you turn home equity into cash, have a waiting period, typically six months — or 12 months, if the loan pays off your existing mortgage. Also, borrowers must have owned the property for at least six months before the refinance. The seasoning period and ownership requirements for cash-out refinances don’t apply if the home was inherited or awarded in a divorce or other legal situation. There may be additional lender-specific guidelines.
Refinancing FHA loans
Mortgages backed by the Federal Housing Administration are called FHA loans. Refinancing FHA loans can be more complex than refinancing conventional loans. The FHA offers multiple refinance programs, each with unique timelines and guidelines:
- FHA simple refinance: This option is for existing FHA borrowers refinancing to another FHA loan with a new interest rate, loan structure or repayment term — for example, from an adjustable rate to a fixed rate. The FHA doesn’t require a waiting period, though some FHA-approved lenders may impose one. You must have made on-time mortgage payments for the past six months or as long as you’ve had the loan, if under six months.
- FHA streamline refinance: Existing FHA borrowers can refinance to a new FHA loan with limited paperwork and no appraisal requirement. You must wait at least 210 days from closing on the original loan and must have made at least six payments.
- FHA rate-and-term refinance: Non-FHA borrowers can refinance a current mortgage to an FHA loan. The FHA does not require a waiting period, though some lenders may impose one. You must have made on-time mortgage payments for the past six months or as long as you’ve had the loan (if under six months).
- FHA cash-out refinance: Existing and non-FHA borrowers can refinance and tap equity (assuming you have more than 20%). You must have owned and lived in the property for the past 12 months. If you have a mortgage balance, you must have had it for at least six months and made on-time mortgage payments for the past year or as long as you’ve had the loan (if less than 12 months). Plus, you must retain 20% equity in the property after the refinance.
Refinancing VA loans
The U.S. Department of Veterans Affairs (VA) offers refinance (and purchase) loan programs to service members, veterans and eligible spouses. VA refinance rates are competitive with other refinance programs.
- Interest rate reduction refinance loan (IRRRL): The VA IRRRL is a streamlined refinance option for existing VA borrowers with limited paperwork and no appraisal requirement. Homeowners must wait 210 days from closing on the existing mortgage and have made six consecutive monthly payments.
- Cash-out refinance: Existing and qualifying non-VA borrowers can refinance their mortgages and access home equity. Homeowners must wait 210 days from closing on the existing mortgage and have made six consecutive monthly payments. Your lender would likely insist you maintain at least 20% equity after the refinance.
Refinancing USDA loans
The U.S. Department of Agriculture (USDA) offers three refinance programs to existing rural borrowers: streamlined, streamlined assist and non-streamlined. Two programs don’t require an appraisal in most cases — streamlined and streamlined assist — while the non-streamlined refinance does.
Other requirements vary slightly between the programs. (Note that the USDA doesn’t offer a cash-out refinance.)
| Type | Waiting period before refinancing (months) | Minimum months of on-time payments |
|---|---|---|
Streamlined | 12 | 6 |
Streamlined assist | 12 | 12 |
Non-streamlined | 12 | 6 |
Refinancing jumbo loans
Jumbo loans, or mortgages with loan amounts above conventional loan limits, are known as non-conforming loans because they don’t adhere to mortgage rules and laws established by the Federal Housing Finance Agency (FHFA). Because of this, jumbo loan lenders set their own refinance guidelines. Generally, you can refinance a jumbo loan anytime, depending on your lender’s requirements.
When it makes sense to refinance your mortgage
“Refinancing is a very personal decision based on your specific loan scenario and financial situation,” said Mariusz Falkiewicz, a Chicago-based mortgage broker.
Despite the time commitment and cost of refinancing, some scenarios warrant it early into your original home loan repayment.
| Scenario | Detail |
|---|---|
You want to lower your interest rate. | Refinancing to a lower rate early into the repayment period can save you thousands of dollars over the loan term. |
Your credit scores have improved. | You may qualify for a lower interest rate or a loan program with better terms and fewer fees. |
You want a more straightforward repayment. | Changing from an adjustable-rate- to a fixed-rate mortgage will prevent future increases and provide stability. |
You need more affordable payments. | Refinancing to a longer-term loan, for example, from a 15-year mortgage to a 30-year loan, would lower your payments. (Ideally, you would want to extend your term without increasing your interest rate.) |
You want to remove mortgage insurance. | If you put less than 20% down on a conventional loan, you’re likely paying private mortgage insurance (PMI). The fee will automatically drop off when your LTV ratio reaches 78%, or at your loan term’s midpoint, but refinancing could remove PMI early if your home value has increased significantly. (Similarly, you might want to refinance an FHA loan into a conventional loan to avoid its mortgage insurance premiums, or MIPs.) |
You want to change to a different loan type. | Refinancing to a mortgage program with better terms or lower fees can save you money. For example, moving from an FHA loan to a conventional mortgage can eliminate loan fees (such as MIPs). |
You need to remove a co-borrower from the loan. | Whether it’s due to a divorce or something else, refinancing to put the loan in your name may be worth the effort. It might be wise to first consult a certified financial professional. |
You want to pay off your home loan faster. | Refinancing to a shorter term — for example, from a 30-year to a 15-year mortgage — will help you build equity and pay off your mortgage faster. It may also reduce your interest rate because short-term loans carry lower APRs. While your monthly payment will increase, you’ll reduce your total loan costs. |
You want to leverage home equity. | Accessing your home equity with a cash-out refinance can help you repay high-interest debt or fund home improvements or other expenses. |
Remind me: What are the benefits of refinancing quickly?
Refinancing your mortgage, whether early or later into your loan, can accomplish various goals.
- Lower your interest rate. If mortgage rates have decreased, refinancing can reduce your rate, monthly payment and total interest paid. “Even a 0.5% drop can translate to some serious savings when you crunch the numbers over the life of the loan,” said Falkiewicz.
- Reduce your monthly payment. A refinance can lower your monthly dues by reducing your interest rate, extending the repayment period, changing the rate structure, moving to a different loan type or leveraging lower credit scores.
- Change your interest rate structure. If you have an adjustable-rate mortgage (ARM), refinancing to a fixed rate can protect you from rising rates and payment increases. On the other hand, you could move from a fixed rate to an ARM to take advantage of falling rates.
- Alter your loan term. Refinancing can extend your mortgage length to lower your monthly payments or shorten it to pay off your home faster.
- Access home equity. A cash-out refinance allows you to tap into home equity for renovations, debt repayment or any large expense at lower interest rates than home equity loans or other financing options.
What to know before refinancing your mortgage (again)
It’s not uncommon for homeowners to refinance multiple times to capitalize on decreasing mortgage interest rates or address personal circ*mstances. However, refinancing in quick succession has drawbacks, even when moving to a more affordable loan or one with better terms.
While it can make sense to refinance in certain situations, there are some reasons to think twice about it, said Falkiewicz.
Closing costs and fees
Each refinance can incur between 2% and 6% of the loan amount in closing costs. For a $200,000 loan, that’s between $4,000 and $12,000. Additionally, some loans may have a prepayment penalty for refinancing within the loan’s early years or other costs associated with a refinance.
There’s such a thing as a no-closing-cost refinance, but that doesn’t come cheap either. In this case, lenders will either roll closing costs into your new loan or increase your APR.
Once you’ve checked your home loan terms, calculate your break-even point — or the number of months it takes for your refinancing savings to trump the costs — to see how long it will take to recoup the cost of the refinance. A mortgage refinancing calculator will do the math for you.
Impact on credit
Applying for and securing a new loan could negatively impact your credit scores initially, as credit inquiries and new accounts play a factor in your scores. Every time you submit to a hard inquiry, for example, your scores can drop by up to five points, according to FICO.
Increased repayment period
Repeat refinancing can extend the time you pay on your home unless you refinance to a shorter-term mortgage or one equal to the time left on your current loan. When you extend your loan term, you allow more time for interest to accrue on your balance.
Higher interest rates
Depending on when you got your original loan and the current refinancing rates, there’s a chance refinancing could increase your interest rate. For example, 90% of borrowers who refinanced in August 2023 saw their rate rise by 2.34 percentage points on average, according to data from ICE Mortgage Technology.
However, if you secured your original mortgage when interest rates were at their highest in the fall of 2023, refinancing could lower your rate.
“Since interest rates peaked back in October, we’ve seen a threefold increase in the number of mortgage holders who could reduce their first lien rate by at least [three-quarters of a percentage point] with a rate-and-term refinance,” said ICE vice president Andy Walden in the company’s February 2024 Mortgage Monitor Report.
Related >> VA refinance rates
Increased overall borrowing costs
Whether extending the repayment term, moving to a higher interest rate or paying four-figure closing costs, repeat refinancing can increase your total borrowing costs. For instance, if you’re one year into a 15-year mortgage for $350,000 at 5.50% and refinance to a 30-year loan at 7.5%, you would reduce your monthly payment by $521 — a significant savings. However, you’d owe nearly $193,000 in additional interest with the new loan, plus closing costs (if applicable).
Slower equity-building
During the early years of a mortgage, a large portion of the monthly payment typically covers the interest on the loan, and a small amount pays down the principal. Repeat refinancing means restarting the clock on the loan amortization (paying the loan down), increasing the time you make interest-heavy payments and delaying the time you start paying down the principal. This results in building home equity at a slower pace.
Frequently asked questions (FAQs)
Refinance waiting timelines vary by loan type and lender. You can often refinance conventional (non-government) mortgages without waiting, whereas some government loans may require a waiting period of six or more months. The refinance type also matters — you typically have to observe a waiting period with a cash-out refinance.
The refinance process is similar to taking out an initial mortgage. After comparing loan terms and settling on a lender, you’ll go through the application, approval, underwriting and closing steps. At closing, the refinance loan pays off the existing mortgage, and you’ll begin making payments on the new loan. If you’re doing a cash-out refinance, you’ll receive the proceeds at closing.
How often you can refinance your mortgage depends on your loan type and lender. Some loans, like conventional (non-government) refinances, don’t have restrictions on how often you can refinance as long as the homeowner meets the minimum loan-to-value (LTV) ratio and other qualifications. However, some lenders and mortgage types — like cash-out refinances, FHA, VA and USDA loans — may impose a waiting period. Typical waiting periods can range from six to 12 months.
If mortgage rates have dropped since taking out your loan, refinancing is an effective way to reduce the interest rate, saving thousands of dollars over the loan term. Refinancing to a shorter period could also lower the rate since shorter-term loans usually carry lower APRs.
Each time you refinance your mortgage, you’ll incur closing costs, typically between 2% and 6% of the loan amount. (Even with so-called no-closing-cost refinances, lenders either roll the costs into your loan balance or increase your APR.)
Some loans also carry prepayment penalties if you pay them off during the early portion of the loan term.
But closing costs and fees aren’t the only expense to consider with repeat refinancing. If you move to a longer loan term or a higher interest rate, you may extend your repayment and the total amount paid on the loan. You’ll also build equity in your home more slowly since monthly payments during the early years of a loan go primarily to interest.
Mortgage lenders typically look for at least 20% home equity on a refinance loan. However, some loan programs allow you to refinance with less equity. With a cash-out refinance, most lenders limit your loan amount to ensure you retain at least 20% equity after the refinance.
