Even if you’ve just bought a home, it’s tempting to refinance your existing loan by seeing mortgage rates fall. After all, even a small decrease can have a big impact when it comes to savings.
Cindy Couyoumjian, founder of Cinergy Financial and author of “Redefining Financial Literacy,” used the following example to illustrate that point.
“Suppose your mortgage payment is $ 1,000, if you cut your interest by 1%, your payment will be reduced by $ 100,” she explained. “That’s a savings of $ 12,000 over 10 years. You have to look at the big picture when refinancing a home. A 1% interest rate drop can translate into thousands of dollars saved over the life of the loan.”
Using an online mortgage refinance calculator can help you determine what your new monthly mortgage payments could be and how much you could save with a lower interest rate compared to your original loan.
As with any mortgage refinance, understanding the terms of your current home loan and your mortgage refinancing options will help you make the best decision. Curious about the current refinancing rates? Visit Credible to get prequalified rates without affecting your credit score.
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How soon can you refinance your home after purchase?
How quickly you can refinance your home loan depends on the type of mortgage you have. While some homeowners can refinance shortly after buying their home, others can have waiting periods of at least six months or longer.
Check out how different types of home loans affect your mortgage refinancing period.
1. Conventional mortgage: If you have a conventional mortgage, meaning it is backed by Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage once you close your home.
That said, some mortgage lenders have a “herbal” period, which is a set amount of time you have to wait before you can refinance your home loan. If your mortgage lender has an herbal requirement, you may be able to get around it by filing an application with another lender. Of course, you want to make sure that your existing loan does not have a prepayment penalty.
When you’re ready to explore your mortgage refinancing options, visit Credible to compare rates and mortgage lenders.
2. Mortgage loan from the government: These types of mortgages have different refinancing terms. Here are the guidelines:
- FHA loans: If you have an FHA loan (insured by the Federal Housing Administration) and you want to refinance by securing another FHA loan, you can do what’s called an FHA Streamline Refinance. This has a waiting time of 210 days from the closing date of the original loan, but does not require re-assessment. If you are interested in a payout refinance where you take out a new mortgage loan for an amount greater than what you owe on your current mortgage and pocket the difference, then you must treat the home as your primary residence for at least 12 months.
- VA Loans: If you have a VA loan (backed by the Department of Veterans Affairs) you will have to wait 210 days or a period where you have enough time to make six payments.
- USDA loans: A USDA loan (backed by the United States Department of Agriculture) requires your payments to be made on time for 180 days prior to the refinance request. In addition, your existing home loan must be closed 12 months prior to initiating the USDA refinance request. Further, home buyers must meet the USDA’s debt-to-income ratio and credit requirements, and the maximum loan amount cannot exceed the original loan amount at the time of purchase.
Do you have questions about refinancing your mortgage? Get in touch with Credible’s experienced credit reps and find the answers you need.
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What are the current mortgage rates?
As the pandemic continues to cause economic uncertainty, annual mortgage and mortgage refinancing rates remain relatively low.
After falling to a 50-year low in January 2021, interest rates rebounded and hovered around 3%. Interest rates are expected to remain at current levels as the Federal Reserve announced it would keep long-term interest rates low indefinitely. Mortgage rates have barely risen above 5% since the 2008 recession, and the National Association of Realtors expects interest rates to average 3.1% in 2021, up from 3% in 2020.
If you think refinancing is the right move, consider using Credible. You can use Credible’s free online tool to easily compare multiple mortgage lenders and see prequalification rates in just three minutes.
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