Refinancing can be a smart financial move to reduce your loan duration, lower monthly payments, or build home equity. However, determining how soon you can or should refinance after purchasing a home can be a big decision.
Refinancing: What does it really mean?
Refinancing essentially means that you are replacing your current home loan with a new one. Here are several reasons that you may consider the refinancing process:
- Reduce monthly payments with a lower interest rate or longer-term
- Pay off your mortgage faster by shortening the terms
- Home improvements or financial hardships are currently happening and you want to tap into your home equity
- Your credit score has recently improved and you’re eligible for a better rate
- Recently married or divorced, so you want to add or subtract someone from the loan
How soon should you refinance?
While you may be able to refinance immediately, there are some lenders that may require several months to pass before you are able to refinance with the same company. Additionally, FHA loans or cash-out refinances typically have longer waiting periods. However, there is an important question to answer before determining if refinancing is the right choice for you; how long do you plan on staying in your home? It’s essential to know that you’re going to be in your current home long enough to recoup fees such as closing costs. If you are not planning on staying put for several years, you may not be able to cover the cost of refinancing. Furthermore, taking your credit score into consideration is another important factor within the decision making process of whether or not to refinance. Taking out a mortgage will most definitely impact your credit score and if you haven’t made enough monthly payments after purchasing your home, it could affect your eligibility.
If it’s the right time, then refinancing can totally be worth it. To get started take a look at our refinancing information and options here.