If you can reach your break-even point in 3-4 years, you'll likely benefit from refinancing.Much longer than that and you may sell the home before you break even - people tend to move every five years or so.Rates vary over time due to market forces, so refinance rates today may be lower the rate you're currently paying, creating an opportunity to save some money.Your loan refinance rate is also affected by your credit score, amount of home equity, debt-to-income ratio and the length of the loan.But our focus here will be on refinancing home loans.You can refinance a home loan almost any time you like. Most lenders are reluctant to consider an immediate refinance shortly after you bought the home or previously refinanced; they like to see that at least one year has passed since you took out the last home loan. A more common concern is that some home loans have prepayment penalties if you refinance them or otherwise pay them off within 3-5 years.
Some do it to switch loan types, such as from an adjustable-rate mortgage (ARM) to a fixed-rate loan.But at its basic level, refinancing a home loan is pretty simple.You take out a new loan and use it to pay off the old one.Or they may be able to pay off their loan faster by refinancing to one with a shorter term and lower rate.Refinancing a home loan may seem like an intimidating process, especially if you've never done it before.
But that's less common than refinancing the primary lien used to purchase the property.