Can You Refinance Early In Your Mortgage? Should You?
Refinancing a mortgage is a great way to reduce monthly costs, get better terms, or tap into the equity in the home. But should you refinance a somewhat new mortgage? Here's what you need to know to make the best use of your household finances.
How Soon Can You Refinance?
The good news for mortgage holders is that you can generally refinance a loan within a very short period of time from taking it out. FHA loans, for example, may allow refinancing as early as six months, while private loans set their own rules regarding minimum time frames. And if you want to shop around for a different loan provider, you may face no minimum time because it's a new loan.
Why Refinance Early?
So, why would a borrower who just completed the loan process want to refinance already? The reasons vary, of course. You may have to refinance as part of a divorce or breakup. Your finances may have taken a sudden shift, either for the better or for the worse. Perhaps you already have a lot of equity in the home that you want to access and use for other things. Or you may just not have gotten a good deal.
While it may not be the most common move, know that many other borrowers have refinanced early too. It's a valid choice and can be the best move for your finances or your personal life.
What Drawbacks Are There?
The decision to refinance early shouldn't be taken lightly. Refinancing costs money, including closing fees, appraisals, and other charges. You also start overpaying more interest up-front, which can cost more in the short term. Finally, keep in mind that you just paid the costs of originating the first loan and refinancing will add a second set of closing fees. Crunch the numbers to figure out if the financial benefits outweigh these added costs.
Borrowers should also refrain from refinancing too often. The costs of refinancing add up and take away from the financial benefits over the life of the property. If you choose to do so early, be sure it's for a good reason and that it will put you in a position to avoid refinancing again for some time.
Where Can You Learn More?
Ready to learn more about refinancing your current or future loan? Begin by meeting with an experienced lender in your state today. With their guidance, you can learn about your options and determine if this is the right time to refinance or not. Call today to get started.
For more information on refinancing, contact a company like Choice Mortgage.