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How soon can you refinance a mortgage after buying a home?

Yahoo Personal Finance· Getty Images
Updated 8 min read

If you recently got a mortgage but aren’t satisfied with the interest rate or terms, you’re probably wondering if you can refinance it right away. The short answer is: It depends. In some cases, homeowners may be able to refinance immediately. But depending on your home loan type and lender’s requirements, it could also take six months or longer.

Here’s everything you need to know about the waiting timelines and costs associated with mortgage refinancing.

Learn more: Want to refinance your FHA loan? Here are 4 options.

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Refinancing your mortgage could potentially save you a good chunk of change over the life of the loan. However, not every mortgage lender or type of loan allows you to refinance immediately; some may enforce a waiting period. So, how soon can you refinance a home mortgage? Here’s what you can expect:

  • Conforming loan refi (no cash out): No waiting period

  • Jumbo loan refi (no cash out): No waiting period

  • Cash-out refi (conforming, jumbo, FHA): 12-month waiting period

  • Cash-out refi (VA): 210-day waiting period

  • FHA or VA Streamline Refi: 210-day waiting period

  • USDA loan refi: 12-month waiting period

Some mortgage lenders will have their own requirements for how soon you can refinance your current loan after buying the home, but these are the rules of thumb.

Read more: 5 ways to prepare to refinance your mortgage

There’s no limit on how often you can refinance your mortgage after your most recent refinance, as long as it makes financial sense for you. However, depending on the lender and the type of refinance, the waiting periods mentioned above can still dictate how soon you can refinance again.

For example, you can typically refinance a conventional loan whenever you want after your most recent refinance, provided that you meet the lender’s requirements. However, you may have to wait up to 12 months to refinance a USDA loan again.

Dig deeper: Is now a good time to refinance your mortgage?

Depending on your financial goals, kind of mortgage loan, and type of mortgage refinance you want to do, you can refinance your loan in various ways. But before you start the process, make sure you understand the rules associated with each.

When you take out a rate-and-term refinance on a conforming loan — a conventional mortgage with terms and conditions that meet Fannie Mae's and Freddie Mac's funding criteria — you pay off your existing conforming loan and replace it with a new one.

As mentioned above, there is no legal minimum timeframe between closing on your last conforming mortgage and refinancing into a new loan. However, some lenders impose a six-month waiting period before you can refinance after taking out a mortgage with them. In this case, you may be able to get around this rule by simply refinancing with a different mortgage lender.

Jumbo loans are another type of conventional loan, but they’re non-conforming loans, which means they exceed Fannie Mae and Freddie Mac’s conforming loan borrowing limits and are not backed by any government agencies. Though jumbo loan lenders may not require a waiting period, they might be pickier about who they approve for refinancing since these loans are much riskier than conforming ones.

With a cash-out refinance, you tap into your home equity by taking out a new mortgage for more than you owe on the first one and receiving the difference in cash. You typically need to wait at least six to 12 months (depending on the mortgage type and lender) and have built 20% equity in your home before you can do a cash-out refinance.

To qualify for the FHA Streamline Refinance program, you must already have made at least six payments on your existing FHA loan. Your loan needs to be in good standing, and at least 210 days must have passed since the closing date.

Learn more: FHA cash-out refinance — Requirements and guidelines

The VA Interest Rate Reduction Refinance Loan (IRRRL) program, also known as a VA streamline refinance, allows you to refinance your existing VA loan as long as it helps you financially, like locking in a lower mortgage interest rate. To qualify, you’ll have to wait until 210 days after making your first payment on your existing mortgage.

If you want to qualify for the USDA streamlined refinance program, your mortgage must be current with on-time repayments for the past 12 months, which means you can't refinance a USDA loan unless a year has passed since closing. Also, your new monthly mortgage payment must be at least $50 lower after the refinance for you to be approved.

Refinancing your mortgage may not always be the smartest move, especially if the costs outweigh the benefits. But here are a few scenarios where refinancing your current mortgage could make financial sense:

  • Your home value has gone up. If you need cash to pay for big-ticket items and your home value has increased since you first took out your original loan, a cash-out refinance can make financial sense if you get a better interest rate on the new loan.

  • You want to convert to a fixed-rate loan. Refinancing into a fixed-rate mortgage could offer some peace of mind if you have an adjustable-rate mortgage but are worried about future interest hikes.

  • Your credit score has improved. Typically, the better your credit score, the better mortgage rates you can qualify for. Use the myFICO Loan Savings Calculator to see how much you could save by refinancing your mortgage with a higher FICO score.

  • Mortgage rates have gone down. If current rates are lower than when you bought your home, a mortgage refinance could save you money on interest and lower your monthly payments. No matter the latest rates, though, always check that the math works out in your favor using a mortgage calculator.

  • You want a shorter loan term. Refinancing to a shorter loan term can be a solid idea if you want to pay off your mortgage faster. But remember, shorter loan terms mean higher monthly payments because you're repaying the same loan amount faster, so make sure you can afford them.

  • You can get rid of private mortgage insurance. You may be paying for PMI if you put less than 20% down on your original mortgage. Refinancing is just one way to get rid of PMI and lower your monthly payments.

Learn more: How a no-closing-cost refinance works

For most conventional mortgages, you can refinance almost immediately after buying. Your mortgage lender might implement a "seasoning period" of six months before you can refinance — but nothing is to stop you from refinancing with a different lender.

In most cases, you do not have to wait one year to refinance. You only have to wait a year with USDA refinancing and with cash-out refinancing on conventional and FHA loans. (You only have to wait 210 days for a VA cash-out refinance.)

Yes, some types of mortgages require you to wait six months or one year, but you should be in the clear by the two-year mark.

In many cases, you can refinance a mortgage pretty much immediately — specifically if you have a conventional loan. Your mortgage lender might tell you it's too early to refinance with them so soon after purchasing a home, depending on the company's rules, but you can always refinance with a different lender.

Refinancing your mortgage could knock your credit score down a bit since you’re applying for a new loan. This means lenders will conduct hard credit inquiries to check your credit report, which could stay on your credit report for up to two years. However, a hard credit inquiry doesn’t impact your credit score for the full two years, and if you continue to make payments on time, refinancing could actually help your score in the long run.

No, you don’t need to come up with a 20% down payment to refinance a mortgage — you usually only need 20% equity with a cash-out refinance. But you’ll probably have to pay closing costs, which you should factor into your refinancing budget. Depending on your lender, you may be able to roll these closing costs into the mortgage to avoid paying them all up-front. According to Freddie Mac, the average mortgage refinance closing costs are around $5,000, but this number could vary depending on the size of your loan and where you live.

There are potential downsides to refinancing your mortgage. If you refinance from a 30-year mortgage to a 15-year one, your monthly payments will probably increase since you have less time to pay off your loan. And though a cash-out refinance lets you borrow against the equity in your home, borrowing that money also means you're reducing your equity. Closing costs can also be pretty steep, which could cancel out the benefits of refinancing a mortgage — especially if you move before reaching your break-even point.

This article was edited by Laura Grace Tarpley