Many folks that decide to purchase a home will take out a mortgage to afford the property. Your mortgage terms determine the monthly payment amount needed to buy your house. However, there are occasionally opportunities that arise to change these terms by refinancing a mortgage.
Interest rates change constantly. Could you potentially find a better deal right after securing your first mortgage? How soon can you refinance a mortgage to suit the current market conditions better?
Below, the Champions Mortgage team explores these questions in more detail. For assistance with your home refinance in Texas, the Champions Mortgage experts and professional loan officers can help. They’ll also help you determine whether it’s the right time for you to refinance your mortgage or whether you should wait it out.
When Can You Refinance a Mortgage?
So, how soon can you refinance a mortgage? The waiting period depends on the loan amount and type. However, your personal circumstances and the current economic factors may also impact the timeline and terms of this refinancing project.
Why Should You Consider Refinancing Your Mortgage?
The economy and your personal financial situation should always guide your refinancing decisions when it comes to a mortgage. These categories influence the cost-benefit analysis to see whether refinancing is the right choice in the current climate. The following factors also count:
Leverage the Interest Rates Dropping
Refinancing your mortgage should allow you to take advantage of lower interest rates. However, these rates only save you money if they outweigh the costs of refinancing. Don’t pounce on lower interest rates before considering net savings.
Obtain Home Ownership Sooner
Another attractive reason to refinance a mortgage is to shorten the loan’s repayment period. While this could temporarily raise your monthly payment, you could own the place sooner.
Enjoy Your Recent Credit Score Improvement
Your monthly payments heavily depend on your credit score. Lenders provide the best rates to those with a credit score of 700 or higher. If you recently attained that threshold, consider refinancing your home.
Switch to a Fixed Rate Loan
Adjustable-rate mortgages yield payments that fluctuate with economic ups and downs. In a recession, that could significantly impact the cost of your home. But refinancing may enable switching to a fixed rate arrangement for a stabilized monthly payment that’s easier to plan around.
Tap Into Home Equity
Homeowners utilize this strategy to cash out on what they already own. Historically, tapping home equity usually precedes recessions, and many people use this cash-out refinance to renovate their homes or pay off major debts like credit cards and student loans. However, the market conditions need to be favorable before making this move.
Drop Mortgage Insurance
Did you know that some mortgages require an insurance expense with a certain percentage of the loan put towards a down payment? If you have equity on hand to nullify mortgage insurance, refinancing may allow you to drop this expense.
Streamline a Divorce
How soon can you refinance a mortgage during a divorce? First, you may need to dissolve the joint ownership of the property. Check with your mortgage lender for the fine print involved.
Refinancing Rules by Mortgage Type
Each mortgage type has very different rules for refinancing, which changes how long you need to wait for things to happen.
Conventional Loans
Most conventional loans allow you to refinance immediately, though not necessarily with the same lender. However, you can seek another loan officer.
If you’re looking for a cash-out refinance, you’ll need to wait at least 12 months after your first repayment.
FHA Loans
Depending on what type of refinancing you are seeking, most FHA lenders will require at least seven months of payments. Cash-out refinancing will require 12 months of payments.
VA Loans
Refinancing Veterans Association-backed loans require a maturity period of 210 days after the first payment or six payments, whichever is longer.
USDA Loans
The United States Department of Agriculture offers rural homeowners some guaranteed loans and direct loans. Depending on refinancing terms, you will have to wait either 180 days or 12 months.
Jumbo Loans
You can refinance most jumbo loans whenever you want. However, the underwriting terms of these loans tend to be strict.
Costs of Refinancing
With its great value potential, refinancing does not come for free. For example, the costs to refinance a mortgage may include the following:
- Application fees
- Loan origination fees
- Appraisal costs
- Title search fees
- Prepayment penalties
- Closing costs
- Attorney fees
Forbes Advisor reported that most refinancing projects cost between 2% and 6% of the total mortgage, which seems consistent with other analyses across the industry.
Deciding Whether Refinancing is Worth the Cost
Of course, there are countless factors that impact whether refinancing your mortgage is worth the investment. If the benefits outweigh the costs, refinancing offers an excellent strategy to strengthen your financial future. Consider the following:
Interest Rates
The market’s interest rates are the primary determinant of the monthly mortgage expense, so significant drops in interest rates could provide a lucrative window for refinancing.
Credit History
Your credit history impacts the rates lenders offer you. If you improve that credit score, you might be able to refinance your home with much better payment terms and lower interest charges.
Financial and Family Plans
How long are you planning to live in your home? Considering the costs necessary to obtain a more favorable mortgage, profiting from a refinancing decision will usually require being in that home for a few years. Other significant financial plans like purchasing a car or starting a business will also play a role in when you decide to refinance your mortgage.
Enlist Expert Assistance With Mortgage Refinancing From Champions Mortgage
Does refinancing a mortgage seem like a daunting prospect? Don’t let the complexities of mortgage refinancing stop you from exploring your options! Wise home refinancing offers property owners an amazing opportunity to save significant amounts of money while still buying a home.
How soon can you refinance a mortgage in Texas? Find out from one of our highly experienced loan officers at Champions Mortgage when you call (281) 727-2500 or apply online!
