How soon you can refinance your mortgage depends on your loan type and lender’s requirements. Some mortgage programs (such as conventional and FHA) allow rate-and-term refinances immediately, while others require a waiting period (210 days for VA loans, for example). Expect to wait 12 months for a cash-out refinance.

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 closing costs (typically 2% to 6% of the loan amount). 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 circumstances 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 government-insured mortgages.
• Federally-backed refinance loan programs (including FHA) sometimes offer streamlined refinances that fast-track the refinancing 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.

How to estimate your LTV ratio: Use 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.

Refinancing conventional loans

Conventional loans are mortgages that aren’t part of a federal loan program, such as FHA, VA or USDA loans.

• Rate-and-term refinances have 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 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 typical waiting period of six months; that extends to 12 months if the loan pays off your existing mortgage. Also, borrowers must have owned the property for at least six months before the refinancing. 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 US 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 US Department of Agriculture (USDA) offers three refinance programs to existing 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.)

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 unique refinance guidelines. Generally, you can refinance a jumbo loan anytime, depending on your lender’s requirements. Keep in mind that jumbo mortgage rates trend higher than conforming loan APRs.

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.

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 circumstances. 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, or use this simple formula: [Cost of points] / [Monthly payment savings].

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.

However, pre-qualifying allows you to check eligibility and rates without the hard credit check that mortgage preapproval requires.

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.

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)

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