Refinancing your home can come with a host of financial benefits. You could get a lower interest rate, pay off your loan faster, save a bundle in interest or convert some of your equity into cash. Regardless of your reason for wanting to refinance, it’s vital to know how long you have to wait to apply for a new loan or if there’s a limit on the number of times homeowners can refinance. You should also understand how refinancing could impact your credit health.
Can Refinancing Your Home Hurt Your Credit?
Refinancing your home can cause a slight dip in your credit score. When you apply for a new mortgage, a hard inquiry is generated and drops your credit score by a few points. The good news is hard inquiries only remain on your credit report for up to two years, and the impact is limited to 12 months.
Assuming you manage all other credit accounts responsibly and avoid opening several credit accounts in a short period, your credit score will rebound in record time.
Timings to Consider When Refinancing Your Home
How Early Can You Refinance?
It depends on the loan product. You may be able to refinance as soon as you leave the closing table and your loan is funded. However, you’ll most likely have to wait at least six months following closing to refinance.
How Often Can You Refinance?
You’re free to refinance your mortgage as often as you’d like. But as mentioned above, many lenders often have mandatory waiting periods of six months or higher from the closing date.
How Long Do You Have to Wait Between Refinances?
Here’s a breakdown of the waiting period by loan type:
- Conventional loans: no waiting period if you opt to use a different lender; using the same lender typically means you’ll have to wait between six to 12 months to apply for a new loan
- VA Streamline Interest Rate Reduction Refinance Loan (IRRRL): six months from the due date of the first monthly payment; some lenders also request that you make 12 months of timely payments before they’ll approve you for a refinance
- VA Cash-Out Refinance: the same guidelines for VA Streamline IRRRLs apply
- FHA Simple Refinancing: six consecutive, on-time payments
- FHA Streamline Refinancing: six consecutive, on-time payments and 210 days (unless you’re applying for a conventional loan)
- FHA Cash-Out Refinance: occupancy of at least 12 months is mandatory before you’re eligible for a refinance
- USDA Non-Streamlined Refinance: 180 days of on-time payments
- USDA Streamlined-Assist Refinance: 12 months of consecutive, on-time mortgage payments
- Jumbo Loans: varies by lender, but the guidelines are generally the same as what you’ll find for conventional home loans
Are There Any Risks When Refinancing Multiple Times?
Refinancing multiple times can be costly for a few reasons. You’ll have to pay closing costs each time, which could be costly. There’s also the risk of incurring prepayment penalties when you pay your loan off early. Furthermore, your credit score will take a slight hit, and you risk getting underwater on your home loan if you refinance several times and market conditions change for the worse.
Should You Refinance Your Home?
There are several reasons why refinancing your home could be a smart financial move:
- Your credit score has improved since securing your home loan, and you may qualify for better loan terms.
- Mortgage rates are lower than they were when you took out your home loan. A slight interest rate reduction could result in several thousand in cost savings over the life of the loan.
- You want to extend the loan term to get a more affordable monthly mortgage payment or shorten it to save on interest and pay your mortgage off faster.
- You want to convert an adjustable-rate mortgage (ARM) to a conventional loan to get a more predictable monthly payment.
- You have at least 20 percent in equity in your home and want to get rid of private mortgage insurance. (Keep in mind that FHA loans carry mortgage insurance for the life of the loan, so you may want to convert to a conventional loan).
- You want to convert your equity into cash through a cash-out refinance.
However, you may not want to refinance if:
- You’ll be relocating soon, and the amount you’ll pay in closing costs will outweigh the benefits of refinancing your home loan.
- The numbers don’t make sense, particularly if you’ll end up paying far more in interest over time despite getting a more affordable monthly payment.
- You can’t afford the monthly payment on the new loan or will only have minimal funds at your disposal each month once it’s paid.
Where to Refinance Your Home
Several banks, credit unions and online lenders offer refinance and purchase mortgage loans. When researching options, be sure to consider Zero Mortgage to assist with your home loan needs.
Zero Mortgage is accredited by the Better Business Bureau with an A rating and boasts hundreds of positive online reviews from borrowers. It also offers competitive rates on home loan refinance products so that you can keep more of your hard-earned money in your pocket. And the mortgage application process is seamless, saving you time and money that comes with having to jump through several hurdles to reach the closing table.
Visit the website and answer a few simple questions to find out in minutes if you’re eligible for a low rate on a new home loan. If there’s a match, you’ll work alongside an experienced loan advisor to learn more about the refinance options that are a good fit for your financial situation and make an informed decision. Plus, you’ll receive exceptional customer support throughout the entire process.
Get pre-approved with Zero Mortgage today to take the first step towards getting the best deal on refinancing or a new home loan.