Buying a house is such a big and important step. For some, it’s a first home, where you plan to move in and live with your loved ones. But for others, it’s a strategic investment they are hoping to see pay off as the years go on. Either way, you may find yourself in a position of wanting to refinance your home. From obtaining a better interest rate to getting a shorter loan term, there are plenty of reasons you may want to go down this path. But the question is, when can you do it. How soon after buying a house can you refinance?

What is Refinancing?

Refinancing is the process of taking out a new mortgage to repay an existing loan. Many people choose to refinance their home due to a change in their personal or financial situation. Others look towards this option because they are simply looking for a better deal. You can refinance with your original lender. However, it’s much more common to change lender in the pursuit of better loan terms.

There are costs involved in the process, which can be up to 5% of the loan’s principal. It also requires everything needed for the original mortgage, such as an appraisal, title search and application fees. Before considering how soon after buying a house can you refinance, it is first worth understanding your exact reasons for wanting to refinance your home before going down the path.

Common reasons for refinancing

  1. Securing a lower interest rate:

This is one of the best, and also one of the most common reasons for refinancing a loan. But how do you know if it is worth it and whether or not it’s a good idea? As a general rule of thumb, it’s a great idea to refinance if it is going to reduce your interest rate by at least 2%.

  1. Shorten the loan term:

You are often presented with an opportunity to refinance an existing loan for another one for a similar monthly payment, but a much shorter term. It’s about doing the maths and working out how much more you would be paying and whether it is worth it.

  1. Converting to an adjustable rate or fixed-rate mortgage:

If fixed interest rates are lower, then you are presented with a unique opportunity to refinance under these rates. You can then enjoy them for the course of your loan, without having to worry about the rates rising and falling.

  1. Consolidating debt:

There are other, more personal reasons why people choose to refinance their home. Getting yourself a better rate and paying off less, in the long run is great. However, some people choose to use equity in their home to cover big expenses, such as renovations, or a child’s education. Debt consolidation consists of tieing all of your debts into one neat and tidy package. This makes repayments much easier to manage, can save you thousands on interest and also stops the nagging creditor calls. This form of loan can provide you with an influx of extra cash and can be either secured or unsecured.

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How Soon After Buying A House Can Your Refinance?

There are so many different reasons for refinancing your home, and each one has its benefits. Make sure to weigh up the costs involved against what you will get in return. From here, you can decide whether it is worth it in your situation. This brings us to the question, how soon after buying a house can you refinance? The great news is, there is no set period you have to wait before choosing to refinance your home. In fact, you can do it in the first year of your home loan approval. But there are some things you should consider before diving in.

One of the most important things to look at is the equity in your home. This is the difference between what you bought the place for and what it is now worth. It is often advised to hold off refinancing until the equity is at least 20%. This is one of the main things that lenders look at when making a decision about whether or not they should lend you the money. The more equity you have in your property, the higher your chances of getting the best deal when it comes time to refinance your home.

Of course, if you are looking at how soon after buying a house can you refinance, the best option is often to wait. It takes time to build up equity in your property, and if you refinance too quickly, you are unlikely to be getting the best deal possible for your situation.

buying a house

Finding The Right Help

Once you have made the decision to refinance your home, it is worth getting the right advice for your personal situation. Perhaps you are refinancing for a better deal, to pay off debts, or to renovate your home. Whatever your reason, it is worth knowing what you are getting into. The experienced team at Debt Consolidation can look at your individual circumstances. From here, we can help you to decide what the best option is for you.