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If you just bought your home, you may wonder ‘how soon after purchasing can I refinance my home?’

It’s a common question and it’s not as crazy as it sounds. In many cases, you can refinance right away, and it may even make sense to do so!

Can you Refinance Right Away?

The short answer is ‘yes you can refinance right away.’ The longer answer, however, is that it depends on your loan program.

If you have a conventional loan, you can refinance tomorrow if you wanted. There’s no waiting period. Other loan programs have waiting periods though and just because you can refinance doesn’t mean it makes sense.

Here’s what you should know.

The Different Mortgage Program Rules

Like we said above, conventional loan borrowers can refinance right away UNLESS you want cash out. If you want to take money out of your home’s equity you must wait 6 months. Lenders need that time to see that you make your mortgage payments on time.

Government-backed loans, including FHA, VA, and USDA loans all require 6 – 7 months before you can refinance whether you’re taking cash out or not.

Investment properties using a non-qm typically have a 1-3 year prepayment penalty if you refinance before the 1-3 year period. The penalty works out to be six months of mortgage interest.

Should you Refinance? Understanding the Break-Even Point

Here’s the bigger question ‘should you refinance?’

Here’s how to answer it.

You need to know your break-even point. This is the point that you pay back your closing costs and the refinance ‘pays off.’

You can figure out your break-even point with a simple calculation:

Total closing costs/Monthly savings with new mortgage = Break-even point

For example, if your closing costs are $5,000 and you will save $200 a month, your break-even point is:

$4,000/$200 = 20 months

If you’ll be in the home for much more than 20 months, it makes sense to refinance. If you have a much longer break-even point though, you may want to reconsider refinancing.

High Appreciation may Accelerate Refinance Benefits

In today’s fast appreciating markets, many borrowers are refinancing much faster than ever before because they can get a hold of great rates with their accelerated equity.

Housing markets like Phoenix, Vegas, Dallas, and Austin have turned 10% down payments (equity) into 15 – 20% or more in a matter of months. The lower loan-to-value ratio could make you eligible for a much lower interest rate than you have now as well as the removal of private mortgage insurance.

Final Thoughts

So, the answer to how soon after purchasing a home can you refinance is much sooner than before. If you have equity in your home that you need suddenly or you had to take a higher interest rate because you had a higher LTV, now could be a great time to refinance.

Figure out how much equity you have in your home and explore your options. You may find that you can save more money every month by refinancing soon after you bought your home. It’s a different real estate industry we live in today – rates are lower, and values appreciate faster, so take advantage while you can!