How Soon Can You Refinance a Mortgage? Here Are the Rules
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How soon you can refinance a mortgage depends on the type of home loan you have and the type of refinance you're getting.
Some mortgages let you refinance immediately after getting the original loan. Others require a period to elapse before refinancing — what the mortgage business calls "seasoning."
This article outlines the seasoning rules for conventional, FHA, VA, USDA and jumbo loans.
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Not sure what type of loan you have? You probably have a conventional mortgage if your loan isn't backed by the Federal Housing Administration, U.S. Department of Veterans Affairs or U.S. Department of Agriculture (USDA), and if it's not a jumbo loan.
Jumbo loans go beyond conforming loan limits, so they don't meet the qualification standards set by the Federal Housing Finance Agency. Most conventional mortgages fall within those guidelines, making them conforming loans, which are usually purchased by Fannie Mae and Freddie Mac.
If you have a conventional loan, you can visit the Fannie Mae and Freddie Mac loan look-up websites to check whether your loan is owned by either of the government-sponsored enterprises.
If you have an FHA, VA or USDA loan, this should be indicated on your mortgage statements, but you can also contact your loan servicer to double-check.
Rules for refinancing conventional loans
In most cases, you may refinance a conventional loan as soon as you want. You might have to wait six months before you can refinance with the same lender. But that doesn't stop you from refinancing with a different lender.
An exception is cash-out refinances. A cash-out refinance is where you borrow a larger sum than what's left on your mortgage and receive that extra amount in cash. To get a cash-out refinance on a conventional mortgage you must have owned the home for at least 12 months, unless you inherited the property or were awarded it in a divorce, separation or dissolution of a domestic partnership.
Rules for refinancing FHA loans
An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA has several types of refinances, each with its own rules.
Cash-out. Similar to a conventional cash-out refinance, with an FHA cash-out refinance, your new loan is for more than you currently owe on your mortgage, allowing you to take the difference in cash. To qualify, you have to own and occupy the home as your principal residence for at least 12 months before applying for a cash-out refinance. You can do a cash-out refinance of a home you own free and clear. If you have a mortgage, you must have had it for at least six months. Any mortgage payments due in the last 12 months must have been made on time.
Rate and term and simple refinance. If you're refinancing one FHA loan to another, without taking cash out, the FHA calls that a simple refinance. If you're refinancing from another loan type into an FHA loan without taking cash out, then it's a rate-and-term refinance. With either one, you're not required to wait to refinance unless the lender has a seasoning requirement. So far as the FHA is concerned, you can qualify with less than six months of payments so long as all payments have been made on time. If you've had the loan longer, any mortgage payments due in the last six months must have been paid on time, and you can't have more than one late payment (30 or more days late) in the six months before that.
FHA streamline. An FHA streamline refinance is a faster way to refinance from one FHA loan to another, with less paperwork, because it doesn't require an appraisal. You must have had the mortgage for at least 210 days and have made at least six monthly payments. Your last six months of payments must have been on time, and you can have a maximum of one late payment (30 or more days late) in the six months before that.
Rules for refinancing VA loans
To refinance into a VA loan — a mortgage backed by the Department of Veterans Affairs — you’re required to wait at least 210 days after you’ve made the first monthly payment or long enough to have made six payments, whichever is longer. This requirement applies whether you're getting a VA cash-out refinance or a VA Interest Rate Reduction Refinance Loan, known as an IRRRL.
Rules for refinancing USDA loans
The U.S. Department of Agriculture offers two USDA mortgage programs for rural home buyers: guaranteed loans and direct loans. For either type, the USDA offers three options for refinancing into another USDA loan. If you get a streamlined refinance or non-streamlined refinance, you must have made all of your payments on time for the last 180 days. For the streamlined assist refinance program, which allows borrowers to refinance with significantly less paperwork, you must have been current on your mortgage payments in the last 12 months.
Rules for refinancing jumbo loans
As with conventional loans, in most cases you may refinance a jumbo mortgage whenever you want — lenders may have their own requirements, but there aren't agency rules to follow. Jumbo loans are for amounts exceeding the conforming loan limits used by Fannie Mae and Freddie Mac, so lenders keep jumbo loans on their own books. That can mean stricter underwriting requirements than for conventional loans.
Reasons to refinance
Now that you know how soon you can refinance, make sure you do it for a constructive reason. Many people refinance to get a lower interest rate on the mortgage, along with lower monthly payments. But that's not the only way to benefit from refinancing. You might want to refinance to:
Shorten the loan's payment period — for example, from 30 years to 15 years. Even if you decrease your interest rate, the new loan's monthly payments might be higher because you're paying over less time. But shortening the loan's term could save you thousands of dollars because you're paying interest for a shorter period.
Switch from an adjustable-rate mortgage to a fixed-rate loan, or vice versa.
Settle a divorce, separation or dissolution of a domestic partnership.
Borrow from the home's equity to pay for home renovations or other expenses.
