Refinancing your mortgage can be a great way to save money and reduce your monthly payments. But when is the right time to refinance? A general rule of thumb is that you must have at least 20% equity in your home if you want to refinance. This figure is usually the amount of capital you'll need if you also want to refinance with cash outlay. In addition, make sure that your credit score and debt-to-income ratio (DTI) meet the refinancing requirements of lenders.
There's no minimum amount of time you should wait before refinancing your conventional mortgage, but some lenders have rules that prevent borrowers from immediately refinancing with the same lender. You can usually refinance a conventional loan as often as you want if you don't get cash from the transaction. To carry out a conventional cash-out refinance, you'll need to have owned the home for at least six months, unless you inherited the property or were awarded it in the event of a separation, divorce, or dissolution from your domestic partnership. The waiting period required to refinance an FHA, VA, or USDA mortgage ranges from six to 12 months. The general 1% refinancing rule states that you should consider refinancing your home when you can get an interest rate that is at least one percentage point lower than the current rate.
This can be a great way to save money and reduce your monthly payments.