Have you researched credit card refinancing, or refinancing a mortgage? What about lender credits when refinancing? These topics are often very interesting. However, refinancing a home is even more so.
The speed with which you can refinance your home depends on the type of mortgage loan you choose. There are some alternatives that allow you to do it immediately, while others require a certain amount of time to elapse, all of which is specified in the contract.
Although some companies claim that you can refinance immediately, the general rule is that you should wait at least six months before starting the process. However, as mentioned before, the limits and guidelines for each refinance depend on the initial mortgage you have.
How can I refinance my home?
The first step is to know the contract regulations of the mortgage loan you acquired, that way, you will know the time in which you will be able to refinance without problems. Furthermore, It is necessary that you know the different refinances available; depending on the one decided, they may take a little longer.
| Type of refinancing | Details |
| Cash-out refinancing | Available after six months from the closing of the initial mortgage of the house. |
| FHA Streamline Refinance | Available 210 days after the closing of the mortgage and the purchase of the home. |
| Modified Loan | Valid 12 to 24 months after homeownership. |
Cash-out refinancing
This is perhaps one of the most requested and appealing to users as it gives them the opportunity to have the money in cash. Although for this alternative it is normal that you wait for a term of six months from the closing of the initial mortgage of the house.
This type of refinancing is a combination of a new mortgage with the alternative of obtaining a cash loan that is backed by the equity in the house. It is recommended when you want to access home improvement projects or any purpose directed to the home.
FHA Streamline Refinance
In this case, it is usually available 210 days after the closing of the initial mortgage and the purchase of your new home. The FHA is the Federal Housing Administration, which can endorse your mortgage and after at least 6 months can offer you a streamlined refinance through a lender.
It is a refinance with fewer requirements or restrictions to enter but has fees and closing costs very similar to the initial FHA loan. Once the stipulated time has passed, you can apply and wait for acceptance.
Modified Loan
This option is valid from 12 to 24 months after you access your home. It is a recommended option when you have financial problems. It was even one of the most commonly granted by lenders during the income reductions caused by the COVID-19 pandemic.
The Right Time to Apply for Home Refinancing
Really, there is no right time for everything, this depends notably on the needs you have once you have your house. Although if you have the possibility to apply for refinancing soon after getting the original mortgage, it can be beneficial in different aspects.
- It is a way to forget about mortgage insurance, this is a requirement on regular mortgages and you need to pay 20% of the total loan at closing
- It can help you access the cash you need in less time. Clearly, you need to opt for a cash-out refinance to take advantage of this option
- You have the possibility of changing the interest rate, which is ideal when the initial mortgage has a very high-interest rate. This way, you are left paying a lower installment with the refinancing
- If you access a loan that has a longer payment term, you have the alternative of reducing the monthly payments
Some considerations before starting with your refinancing
Before you begin the adventure of refinancing your home, you have to keep in mind some considerations to make sure it’s the choice you really need. Don’t get carried away by what others have been able to do and what worked for them, you must be clear about the circumstances in which you find yourself.
Remember that the shorter the term, the lower the rate
When you consider refinancing to reduce the term of your mortgage, you may be able to access better mortgage rates. Although it is a choice that you should evaluate carefully, it is an excellent option to reduce the term, but the monthly payments will go up.
This option is recommended when you have made the necessary calculations and you are certain that you can cover the payment in the estimated time without jeopardizing the rest of your responsibilities.
Do not trust refinancing advertisements too good to be true
You must avoid falling into the trap of many lenders offering incredibly low rates. These often have many complex requirements to meet or include fine print that you ignore and will cause inconvenience.
Instead, seek advice from a trusted professional who can guide you to the options you have and the ones that may best suit your needs. It is not advisable to trust something that seems too good to be true, it is usually not as true as advertised.
Keep in mind that it is a process that takes time
As explained by several professionals, the process of refinancing a home is as long as the process of acquiring the mortgage in the first place. You need to gather all the necessary documents such as tax returns, bank statements, and proof of your income for the person who will be handling your refinance.
It is a time-consuming process, considering that they need to do all the necessary reviews of each of the requested documents and the verifications before the legal entities. You should keep this in mind because if you expect to have the refinancing in a short time, this is not possible in most cases.
You must make some expenses
In addition to all the time you have to invest in the refinancing, you also have to cover some expenses such as the appraisal of the house and, in some cases, a home inspection is required. All of this must be paid out of pocket, including some closing costs that require upfront payments.
Remember to keep all of this in mind before you start refinancing your home, it is essential to consider if this is the best choice available to you or if you can opt for other alternatives.
References
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Akin, Jim. “How Soon Can I Refinance My House? – Experian.” Check Your Free Credit Report & FICO® Score – Experian, Experian, https://www.experian.com/blogs/ask-experian/how-soon-can-i-refinance-my-mortgage/
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Lewis, Holden. “How Soon Can You Refinance a Mortgage? Learn the Rules – NerdWallet.” NerdWallet, https://www.nerdwallet.com/article/mortgages/how-soon-can-you-refinance-mortgage