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How Soon Can You Refinance a Mortgage After Purchasing a Home?

Total Path Get Started
Darren Kaplan

Darren Kaplan

Branch Manager/VP, Mortgage Banker

Phone: (844) 772-LOAN (5626)

Email: [email protected]

NMLS: 4232

Now that you’ve purchased a new home, you may be wondering what your next steps are. You can always get started with renovations or additions to improve your home’s value – but for many, refinancing is the way to go.

But how soon can you refinance a mortgage after purchasing a home? No matter how ready you may be, it’s important to assess your goals, check with your lender, and recognize the potential drawbacks.

In this article, we’ll cover everything you need to know about refinancing as a new homeowner.

Step One: Assess Your Refinancing Goals

Just because you can refinance soon after closing doesn’t necessarily mean that you should. Always assess your goals first – because depending on those goals, your path forward could significantly change.

So why do you want to refinance? Let’s look at some reasons that are common among new homeowners.

Top Reasons to Refinance a Mortgage

  • Lower monthly payments. Refinancing is the best way to reduce your monthly payments and is especially popular when mortgage rates are low. However, most lenders won’t allow a new mortgage to be refinanced until 120-180 days after closing. If you’re looking to refi sooner than that, you may need to find another lender.
  • Switch to a new loan type. Under the right circumstances, refinancing offers the opportunity to change to a different loan type. For example, an Adjustable-Rate Mortgage (ARM) with a varying interest rate can be refinanced into a fixed-rate Conventional Loan.’
  • Pay off your loan faster. By refinancing, you could shorten the length of your loan and finish paying it faster. And with a paid-off mortgage, you’ll have a significant excess of funds to save, invest, or improve your home’s value.
  • Tap into equity. Refinancing is a great way to access your home’s equity. Whether it’s a Cash-Out Refinance or a Home Equity Loan, you can leverage the value of your home to gain an influx of cash.

Step Two: Check with Your Lender

Regardless of your mortgage type, you should always ask your lender for specific details. In the case of refinancing, you can find out exactly when it’s allowed – because different lenders have different restrictions.

The general window from closing on a new mortgage to being able to refinance is 120-180 days. This will depend on your specific lender, so don’t be afraid to ask questions!

What is a Pre-Payment Penalty Clause?

Another variable worth considering is whether your mortgage has a pre-payment penalty clause. This is a part of your contract that allows your lender to issue a fee if you pay off your loan early – typically within two or five years. Since refinancing effectively “pays off” your mortgage, you may be forced to cover a pre-payment penalty fee.

The good news: pre-payment penalty clauses are rare. Still, it never hurts to consult your lender to better understand their specific rules and guidelines. Total Mortgage loan experts are also available 24/7 and happy to help.

Are There Disadvantages to Refinancing?

There’s no denying that refinancing a mortgage comes with great benefits. But what are some of the drawbacks? If you’re looking to refinance your new mortgage as soon as possible, these potential disadvantages may make you think twice.

Top Disadvantages of Refinancing a Mortgage

  • Extra Costs. From start to finish, refinancing comes with its own set of associated costs that can add up and make the transaction less worth it.
  • Longer Loan Term. In some cases, refinancing can extend the life of your loan. If you refinance a 30-year mortgage to a new 30-year mortgage, for example, your loan term will be extended accordingly.
  • Larger Loan Payments. If you choose to refinance your loan to a shorter term, you’ll likely need to spend a larger amount each month to pay it off faster.

Step Three: Refinance with Total Mortgage

If you’re ready to take the next step, our quick apply form for a free zero-obligation meeting with a loan expert. Alternatively, our free Refinance Calculator is a great tool to set realistic expectations and simulate what your refi could be like.

Contact us anytime if you have questions!