When Can You Refinance a Mortgage

Refinancing your home is a great way to lower your monthly payments or tap into cash via home equity. But how do you know when you can refinance your mortgage? This will depend on a number of factors, from meeting eligibility requirements and passing the waiting period. 

In this blog, we’ll explore when it makes sense to refinance your mortgage.

Times When You Should Refinance Your Mortgage

Some lenders will have waiting periods and eligibility requirements to meet before you can refinance. Here are the best times to refinance your mortgage.

• The waiting period has passed. Many lenders will have a waiting period before you can refinance after you take out your mortgage. Conventional cash-out refinancing will have a waiting period of at least six months, while FHA and USDA loans have a waiting period of 12 months. VA loans have a waiting period of 210 days or six consecutive mortgage payments, depending on whichever is longer.
• Interest rates have dropped. If the interest rates have dropped since the time you purchased your home, refinancing with a lower rate can result in lower monthly payments. At the same time, you might also be able to switch your interest loan type from adjustable to fixed for more predictable monthly payments. You should refinance your mortgage when you can reduce your interest rate between 1 and 2%. 
• You’ve improved your financial profile. A stronger financial profile helps you get a mortgage with better terms. Lenders consider three factors when approving mortgages: your credit score, debt-to-income (DTI) ratio, and loan-to-value (LTV) ratio. The best interest rates usually go to homebuyers with the following scores:
  • A credit score of at least 780
  • A DTI with a maximum of 35%
  • An LTV with a maximum of 75%
    
    You can improve your financial profile by lowering your high-interest debts, limiting new lines of credit, and increasing your income.
• You can shorten your loan term. It makes sense to refinance your home when your income has increased because a shorter-term mortgage with higher monthly payments will allow you to pay off your mortgage sooner.
• Your home equity has grown. You should only refinance your home if you have equity available in your home. This is crucial if the value of your home drops from when you purchased it. You can increase your home equity by making improvements like updating the kitchen, adding curb appeal, and making your home more energy efficient.

Refinance Your Mortgage with Florida State Mortgage Group

Are you ready to start the process of refinancing your mortgage? Call our knowledgeable team at Florida State Mortgage Group at (954) 359-3000 to start your application, and let us walk you through the process.