If you’ve had your mortgage for a while or have built equity in your home, you may have considered refinancing. Refinancing is when you take out a new home loan to pay off the existing one to gain some financial benefit, such as locking in a lower interest rate.
How soon you can refinance depends on the type of mortgage you have. It also depends on the type of refinance you’re seeking. Learn more about when you can refinance a mortgage and how to know whether now is a good time.
When Can You Refinance a Mortgage?
Special loan programs may have varying time requirements based on the type of refinance. But even if you’re immediately eligible, you need to be able to identify how refinancing your mortgage may benefit your financial and life goals.
Many major loan programs don’t allow you to refinance too soon after a purchase or other refinance. Some loan programs require at least 12 months of payments on the existing home loan before you can refinance. This is intended to eliminate the predatory practice of loan flipping, in which a lender encourages borrowers to refinance repeatedly, accumulating more debt through the additional fees and interest points of a refinance.
“This is to prevent predatory refinance offers coming right after you buy or refinance a home seeming to offer a lower rate,” says Corey Vandenberg, a mortgage loan officer at Success Mortgage Partners. “It’s considered predatory and even equity-stripping to refinance without benefit to the customer.”
That said, different loan programs and different types of refinancing have their own rules.
Refinancing Conventional Loans
Conventional loans refer to mortgages not insured or guaranteed by the government. However, the majority are backed by either Fannie Mae or Freddie Mac, which determine the lending criteria that must be followed.
There are two main ways to refinance a conventional loan.
— Conventional cash-out refinance. With this type of refinance, you take out additional funds beyond the amount needed to pay the existing loan so you can receive a lump sum of cash. For both Fannie Mae and Freddie Mac cash-out refinances, the existing mortgage you’re paying off must be seasoned for 12 months, meaning you have had the loan for a full 12 months. There are some exceptions. For example, there is no waiting period required when the home is acquired through divorce or inheritance.
— No cash-out refinance. The waiting period is much shorter for a regular rate and term refinance, in which you’re simply using a new loan to pay off your existing one with no additional cash. According to Freddie Mac, there’s just a 30-day seasoning requirement, meaning the refinance mortgage being paid off must have a note date of at least 30 days before the note date of the no cash-out refinance.
Remember that if you try to refinance with the same lender as your existing loan, that lender might have its own seasoning requirements.
[Read: Best Mortgage Refinance Lenders.]
Refinancing FHA Loans
Loans backed by the Federal Housing Administration are intended to help more people become homeowners, and these have their own rules and procedures regarding loan and refinancing requirements. There are four types of FHA refinances.
— Cash-out FHA. To qualify for this type of refinance, the borrower must have occupied the property as their principal residence for at least 12 months before the application date.
— Streamline FHA. Intended to be an easier process with less underwriting and paperwork, you can only use a streamline refinance if you have an existing FHA mortgage. In addition, you must have made at least six payments on the existing home loan, at least six months must have passed since the first payment due date of the original loan and at least 210 days must have passed between the original loan and the new loan closing date.
— Rate and term FHA. This type of refinance is for non-FHA loans into an FHA for a better interest rate with no cash out. There is no seasoning requirement, but lenders generally require a recent history of on-time payments.
— Simple FHA. This is when you are refinancing an existing FHA mortgage to a new FHA mortgage with no cash out. There is no seasoning requirement, but you can’t have any recent late payments on your existing home loan.
[Read: Best Mortgage Lenders]
Refinancing VA Loans
The U.S. Department of Veterans Affairs guarantees VA home loans. There are a couple of VA refinance programs, both of which have the same seasoning requirements.
— Cash-out VA. Generally requires that the number of days between loan closings for a cash-out non-VA to VA refinance cannot be fewer than 210 days.
— Interest Rate Reduction Refinance Loan. If you already have a VA-backed loan and want to lower your interest rate and monthly payments, the IRRRL program is available. Also called the VA Streamline loan, it requires the loan to be seasoned for at least 210 days. Beyond that requirement, it’s a very simplified process.
Refinancing USDA Loans
The United States Department of Agriculture’s home loan program offers two options for loan refinancing: streamlined and non-streamlined. Either way, it is required that the mortgage must have closed 12 months before your refinance application, and that you’ve paid your mortgage on time for at least 180 days prior.
There’s also the USDA Streamlined Assist Refinance, which is for USDA direct and guaranteed rural homebuyers and doesn’t require a credit check. The key requirement is that you must be current on your mortgage for 12 months before applying. Like the other USDA refinance options, there’s a 12-month seasoning requirement.
Refinancing Jumbo Loans
Jumbo loans are not conventional loans because they exceed the Federal Housing Finance Agency’s borrowing limits. It is possible to refinance a jumbo loan, but the process varies by lender. As such, there is no specific timeline for how long you’ll need to wait to refinance. Overall, you can expect a more stringent process.
When Is It a Good Idea to Refinance a Mortgage?
There’s no right reason or time to refinance a mortgage. “It isn’t a one-size-fits-all equation,” says Christy Bunce, president of New American Funding. “It really depends on the customer’s situation.”
A mortgage refinance may be an option in a few common situations, even if you’re not very far into your loan term.
— Pay off smaller debts. “In a low-interest-rate environment, a cash-out refinance to consolidate debt can be amazing,” says Bunce. Just be mindful that you’re eating into your equity when you do that, she warns. “Lots of borrowers use the equity in their home to clear out debt, and then two years later they are doing it again.”
— Lower your mortgage payment and/or interest rate. The most common reason for refinancing is to get a lower interest rate than you already pay. If so, this usually allows you to lower your monthly payment or shorten the term of your loan.
— Consolidate home loans. “Many people have added a second mortgage or HELOC and wind up with two mortgage payments,” says Vandenberg. A refinance can allow you to pay off both loans and go back to just one payment.
— Change loan programs. Another reason to refinance is if you’re in an FHA loan with mortgage insurance premiums, you can move into a conventional loan. Having enough equity can save you from having to pay insurance on top of your loan each month.
— You have no choice. Sometimes other factors force someone to refinance, such as divorce or death, says Vandenberg. “A member of the family may want to take over the home and put it in their name, which would necessitate a refinance.”
Conduct a cost-benefit analysis to determine whether the closing costs outweigh the benefits of a lower interest rate. Remember that refinancing typically resets the loan term, which may increase the overall interest paid over time.
Crunch Your Numbers
No matter how long it’s been since you bought your home or last refinanced, evaluate a new refinance from every angle to determine whether it’s worth it. Make sure you understand the full cost, consider how far along you are with your current loan, and think about how long you plan to stay in the home. Market factors, such as current interest rates, can also influence whether it’s a good time to refinance.
“Make sure your lender explains the benefits and drawbacks and you see a definite benefit in doing a refinance,” says Vandenberg.
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How Soon Can I Refinance My Mortgage? originally appeared on usnews.com
Update 11/24/25: This story was published at an earlier date and has been updated with new information.
