How Soon Can I Refinance a Mortgage After Purchasing a Home?
Reader Question: “I purchased my home a little over a year ago, and now I want to refinance to take advantage of the low interest rates. Is it to soon for me to do this? What are the rules that apply? How soon can I refinance my mortgage loan after purchasing the home?”
Let me start by saying I would have answered this question differently a year ago than I will today. A lot has changed with our housing market, mortgage industry and economy as a whole. So the requirements for home refinancing are a bit different today than they were in the past.
How soon you can refinance a home loan generally depends on three things:
- Your state laws. Different states have different rules about mortgage refinancing.
- The amount of equity you have in your home.
- The current value of your home, based on recent sales in your area.
It’s rarely a good idea to refinance soon after purchasing a home. But if you’re past the one-year point, it may work out to your advantage. Keep in mind that most lenders today are requiring homeowners to have at least 20% equity in the home to qualify for refinancing.
The value of your home in the current market is another big factor that will determine how soon you can refinance after purchasing the home. This is a problem for many homeowners right now, because a significant drop in values has put a lot of folks in a situation where they owe more than their home is worth (in the current market). So now you have some homework to do. You need to find out the remaining balance on your mortgage, as well as your home’s current value.
Also, if you have an adjustable-rate mortgage loan that’s set to adjust in the near future, you might qualify for the FHA Hope for Homeowners program. This is one of the so-called “bailout” programs recently launched by the federal government. I’m not sure how well it’s working though.
There are also a lot of mortgage modification programs being introduced by private lenders — these are intended to help people avoid a possible foreclosure situation. There are specific requirements for these programs though, so you’ll have to do some research to see if you qualify.
Under pressure from the federal governments, many lenders are focusing on foreclosure avoidance for at-risk homeowners, and that’s where their refinancing resources are being directed. So in order to determine how soon after purchasing you can refinance your mortgage, you need to consider all of these factors.
If you think you’re a candidate for refinancing, and you end up getting some mortgage quotes from lenders, you’ll also want to determine how beneficial it would be for you. Based on the lender’s offer (interest rate, closing costs, etc.), you can run the numbers to see if a refi makes sense for you. Remember, it’s doesn’t always make sense to refinance your home. Sometimes it costs more than you gain in savings. Some states have laws in place that only allow refinancing when it benefits the homeowner. But not all states have these laws, so you need to look out for your own interests.
How soon can I refinance a mortgage after purchasing a home? It’s a tough question to answer in this economy. I wish I could give you a specific time frame, but there are too many variables involved. So to move forward, find out how much you owe and what the current value of your home is. How much equity do you have? Do you have an ARM loan that might qualify for you one of the programs mentioned above? Answering these questions will help you determine how soon after purchasing you could refinance your home — and benefit from it.
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Filed under: Refinance Questions
I have refinanced people before even they paid their first mortgage.