How Long Should You Stay In Your House After Refinancing?
Refinancing does not set a time limit on how long you must remain in your home. The days, weeks, and months are not carved into stone. Your situation and the terms of your loan will determine the answer.
It may not be beneficial to leave your home immediately depending on your circumstances and the terms of your refinance. In general, however, there is no rule that says you cannot relocate after refinancing.
How soon after refinancing can I buy another primary residence?
You will need to wait until the refinance closes to receive your funds if you’re refinancing your primary home for a second home down payment. Generally, it takes 35-45 days for a cash-out refinance to close, depending on factors such as how busy your lender is and whether an inspection or appraisal is required.
You can move forward with purchasing a second home as soon as you have cash on hand. However, you have to consider one other factor: your credit score.
Can I sell my house right after refinancing?
Even if you intend to sell your home, you are not prohibited from refinancing. In most cases, a refinance is not beneficial to you as the buyer because of the costs associated with closing.
Prior to closing on your new mortgage loan, you have to pay closing costs. Similarly to closing costs when you buy a home, closing costs go to your lender and cover services related to closing the loan.
Depending on your loan type, where you live, and your lender, you may have to pay different closing costs. As a general rule, closing costs should be between 2 and 3% of the loan amount. Accordingly, if you refinance a home with a $150,000 principal balance, you can expect to pay $3,000 to $4,500 in closing costs.
How soon can I sell my house after purchase?
It is possible to sell your house immediately after refinancing – unless your new mortgage contract includes an owner-occupancy clause. It is common for owner-occupancy clauses to require you to stay in your house for six to twelve months before selling or renting it out. Owner-occupation clauses sometimes have no expiration date and are open-ended.
In the event that you sell your house before the owner-occupancy clause in your contract expires, you may run into problems with your mortgage company during closing. Ensure there are no owner-occupancy clauses in your loan documents. If there are none, you can move forward.
In addition to a prepayment clause, you may also encounter a clause that doesn’t keep you from selling your home after refinancing but can make it more costly. In case of a premature sale of your house after refinancing, you may incur a prepayment penalty. Prepayment penalties must be clearly spelled out on any correspondence that your mortgage company sends you.
Can you move out after refinancing?
The frequency of refinancing your mortgage isn’t usually regulated by mortgage lenders. They may restrict when you can sell after refinancing, though. For a variety of reasons, moving out of your home can make refinancing your mortgage more difficult. In the first place, your home is no longer your primary residence when you move out. When you refinance a mortgage on a home you no longer live in, the loan is classified as a non-owner-occupied loan.
To qualify for a refinance, you also need to have more equity in your home. You can refinance your primary residence without taking any cash out at a loan-to-value ratio of 97%, as opposed to 90% if you are refinancing a second or vacation home and 75% if you are refinancing a rental property that you no longer inhabit.
Applying a lower loan-to-value (LTV) ratio for a non-owner-occupied mortgage lowers the loan amount you can obtain and may prevent you from refinancing. The LTV ratio of your home valued at $200,000 and its current mortgage balance of $170,000 is 85%, which exceeds the maximum LTV limit of 75% for a non-owner-occupied loan.
Because you do not have enough equity in the house to refinance a mortgage, you cannot do so if you move out. Therefore, it is best to refinance while you are living in the property since you are eligible for a higher LTV ratio.
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Financial Consultant and Author