The mortgage refinancing process (the act of replacing your existing mortgage with a new loan) can often be daunting to many people, especially first-time homeowners. Part of the reason for this is the fact that there are different types of ways to refinance a home (varying terms, interest rates, etc.), and the laws on mortgage modifications may also vary by state. However, another question many homeowners who are new to this process may have is, “How long should I wait before refinancing?”
The Timeline For Refinancing A Home
One of the first things you should know is that a home refinance typically takes several months. Additionally, you should keep in mind throughout the process your primary reason for deciding to refinance (reduce your monthly payments, obtain a lower interest rate or other more favorable terms, eliminate private mortgage insurance, etc.). Then develop a clear plan about how to achieve your financial objective(s).
In any case, a home refinance can often save you a significant amount of money, especially when interest rates are at a certain level. According to personal finance website Bankrate, approximately 7.8 million borrowers with a 3.77% interest rate can save money by refinancing.
The Optimal Time is 12 Months
In certain cases, refinancing can be done immediately. Nevertheless, you may have to wait in some situations:
- If your original mortgage was altered so that your payments became more affordable, you may be required to wait up to two years before you have the opportunity to refinance this loan.
- If you intend to complete a cash-out refinance, you may be forced to wait at least six months after your original mortgage closed.
- In the case of a refinance for a Federal Housing Administration (FHA) loan, the waiting period typically lasts 210 days.
The optimal time to wait for a refinance, however, is generally 12 months after your current mortgage closes. Sometimes, applying for a refinance too soon may negatively impact your credit score, so be sure to keep this in mind. Additionally, certain mortgage lenders issue penalties to homeowners who refinance within a given time frame.
Benefits of Refinancing A Home
There are many benefits to refinancing a home. However, here we will focus on two of these advantages: reduced monthly payments and a change in your loan’s interest rate structure.
Lower Monthly Payments
A mortgage refinance can help you save money for debts and other pending expenses that you might have. A reduction in monthly payments can especially relieve a significant amount of anxiety during times of financial hardship (e.g. following a loss of income due to unpaid leave or after becoming unemployed during an economic recession). Of course, if you switch to a mortgage with lower monthly payments, your new loan may have a longer term (e.g. ten years vs. five years).
Change In Interest Rate Structure
When you are looking to refinance, lenders will typically offer you two different choices for loans: a fixed-rate mortgage (FRM) or an adjustable-rate mortgage (ARM). As an ARM’s name indicates, its interest rate varies depending on certain factors (e.g. market interest rates), even though it can often save you money upfront due to the relatively low fixed rate it carries during a given initial period. If your financial situation is unstable for any reason, a fixed-rate mortgage may likely be the more sound option.
Other notable benefits of mortgage refinancing include getting rid of private mortgage insurance (PMI, which is generally required if you put down less than 20% of your loan amount at closing), using your home equity for cash, or consolidating your home equity line of credit (HELOC) and original mortgage into a single payment.
Talk To Mathis Title Company For More Info On How Long To Wait Before Refinancing A Home
Speak to the professionals at Mathis Title Company in Fairfax, Virginia for more information on the amount of time you should wait before beginning a mortgage refinance. We provide personalized real estate settlement services and legal advice to buyers, sellers, lenders, and agents. Our highly experienced team includes Robin Mathis, an attorney who has performed thousands of closings (small commercial and residential) for over 30 years
Regardless of the type of home refinance you are pursuing, Mathis Title’s professionals are here to guide you through every step of the process. We can order title searches, prepare closing documents, and work closely with your mortgage lender. Call Mathis Title Company today at (703) 214-4020 or contact us online to schedule a consultation or to learn more about our real estate services.