How soon after buying a house can I refinance?” if you’ve also been tempted by the thought, then you’re not the only one. We’ll like to believe that you previously obtained a loan to buy a house and you’re looking for a way to lower the interest rate, then the first option that will look attractive is refinancing. However, whether you’ll be able to move to a new debt will be determined by a number of factors.
What is Refinancing?
Refinancing a loan involves getting a new loan from the same or different lender in order to replace the current one. With the competitive nature of the market, several options are evolving to give us better interest rates. As such, what you settled for a couple of months or weeks ago may have higher rates and switching can save you the extra expenses.
Benefits of Refinancing
Some of the benefits of refinancing are listed below:
- It enables you to get lower interest rates and therefore save up for other things
- Allows you to switch to a new loan whose package may be more attractive
- In the case of a consolidation, refinancing can help to merge your debts into one
How Soon Can Your Refinance a House After its Purchase?
While you can refinance immediately, your ability to do so will be determined by your lender. Did they specify any prepayment penalty that says you can’t refinance within a specified period of time? If so, then you may have to wait for a while. Nonetheless, this should not be a problem given that most lenders in 2019 have stated that there is no prepayment penalty and as such, you can refinance soon.
Also worthy of note, is that you will need a new lending company to refinance instead of the current one. If your lender had to pay a premium service fee to lend to you, then they may be less than willing to repay the same fee after a couple of weeks or months for the same deal.
Keep in mind that while refinancing, you will also need to set a new appraisal which will be similar to its former appraisal. For instance, the same 80 percent of the loan-to-value ratio of your former deal if that was the case.
Other Factors That Determine if You Can Refinance Immediately
Other factors that influence whether you should refinance immediately include:
- Closing cost
- The Break-Even Point
- Your Lender’s Policies
1. Closing Cost:
Before refinancing, you may have to think of the closing fees which ranges between 2 to 5 percent of the amount you were lent. Given that the payment was for a house, it is safe to assume that the cost was pretty high and thus, 5 percent may be a whole lot. Nevertheless, if your gain through refinancing is something worth overlooking the current fee, then it’s a good option.
2. The Break-Even Point:
As already stated, refinancing can save you a couple of dollars throughout the loan’s period, but then, you need to determine if it’s worth it in the long run. Are there any long-term costs, such as an extended break-even point? In the same vein, will you end up spending more instead of making savings as you’d planned?
3. Your Lender’s Policies:
Certain lenders have their own policies asides stating if there is a prepayment penalty. One of such is certain duration to be elapsed before a refinancing application can be accepted.
Now that you know how soon after buying a house you can refinance either from a personal loan or mortgage, it should clear any doubts you may have about the process. Moreover, it all boils down to your lender and the terms of the agreement you signed to.