How Soon Can a Mortgage Be Refinanced?
The right time
Getting a mortgage is not for sissies. This type of loan, whether you're taking it out to purchase a car or a house, is easily one of the biggest financial decisions you'll ever make in your life.
If you're taking out a home mortgage loan and are considering getting it refinanced later, you'll be glad to know that you could probably do it at any time you want. But once you have a mortgage and interest rates begin behaving in a manner that is favorable to you, you shouldn't automatically apply for refinancing.
First, the difference in the new interest rate and the current interest rate should be enough to actually give you some advantages. Second, most lenders will probably advise you to refinance only after your loan has matured for a minimum of 12 months or so.
However, it's good to consider this only if interest rates have remained more or less the same. If, at any time after you have taken out a mortgage loan the market trend begins tipping to your advantage, you should consider refinancing your loan. Remember that interest rates are rather volatile and if you wait too long for them to dip further, you could miss out on a very good opportunity to get a good deal.
Consider the 2 percent rule.
Just because interest rates have fallen a tiny bit does not automatically justify your decision to refinance. Consider refinancing only if the new interest rate is at least 2% lower compared to the rate you're currently paying. A 1% difference in interest is not sufficient reason to make the switch.
Remember that there are costs associated with a new loan. When you consider refinancing for your mortgage, remember that you will have to pay extra for closing fees. An interest rate as low as 1% will not cover the expense.
You have no late payments.
You could go ahead and refinance a mortgage provided you have paid your loan faithfully for the last 12 months. If you have never had a late payment during the last year, you could make the shift and have your mortgage refinanced.
You have already built up equity.
If you want to refinance a mortgage soon, try to examine if you have already built up equity. You should have a minimum of about 5% or 10% equity (depending on the lender) before you could consider refinancing as a feasible option.
So is refinancing an option for you?
Of course, you can always consider refinancing your mortgage at any time you feel most comfortable. The key is to consider the time factor, along with the type of opportunity being presented by the market. After all, refinancing is really getting a new loan. Just be prepared for the procedures and costs that you will have to go through all over again.
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