Why do people say that you can't refinance until 2 years after the purchase of a home?

Answer 1

Corel hit the nail on the nose. You can in fact refi whenever your heart desires, but due to lender regulations, called "SEASONING" they want you to own the home for at least one year before you are able to use the TRUE value of the home, rather than the amount is was purchased for.

Some lenders require 1 year, others only require six months, whereas others don't require any seasoning whatsoever. Still, I have never heard any lender that requires 2 years.

There is also not anywhere that states the lender wants you "to prove yourself" first, as one person stated in this session.

As far as pre-payment penalties, they do not stop you from refinancing out of your mortgage, they simply charge you a FEE for paying the loan off early. This is a very common practice.

Answer 2

Although that is not the case, there are a lot of lenders who will only allow you to refinance using the purchase price as the home value, even if housing values have increased. That is why many people think you cannot refinance until you have owned the home for 2 years. The rules regarding that do vary some from lender to lender.
You can refinance the very next day after buying the home if you choose to do so, though that is not always in your best interest, unless you find a much lower interest rate and are willing to pay for the closing cost all over again.

Answer 3

I don't know. This is one of those urban legends that refuses to die.

The only reason not to refinance if you can find a better loan is if you have a prepayment penalty. Unfortunately, there's a lot of those out there today (mostly from loan officers that wanted to make more money), but even if you have one, it's not a prohibition, just more expensive. Rule of thumb is don't refinance while you have a penalty; it's hard to break even. Better still not to accept on in the first place. Most people don't have to.

Answer 4

You can refinance whenever you would like to. However, if you financed 100% when you bought the house then the lender will make you pick up the tab for the closing costs as opposed to financing them into the loan as is standard procedure. Also, they want to see you make at least 12 months worth of on-time payments to help establish your reliability as a consumer.
It usually is for your own protection to wait the 2 years, then you have enough equity to cover the new loan's costs.

I hope this was helpful!

Answer 5

That's nonsense. You can refinance whenever it makes financial sense. You may have agreed to a prepayment penalty when you bought your house and you'd have to take that into account.

We refinance people a year or so later quite frequently, depending on their own personal situation.

Equity can be an issue if you went in with little or nothing down and the home has not appreciated much.

Answer 6

Actually, you can refinance whenever you have sufficient equity and it makes sense for you to do so. The only exception to this would be if your loan contained a clause that specified a pre-payment penalty for early payoff.

Answer 7

My guess is that you have to make some payments to build up some equity before you can refi. That is, when you first buy it, you really own very little of it, the bank owns most of it. There's nothing to offer against a refi loan.

But then, I've never owned a house and my understanding of all this is sketchy.

Answer 8

There is zero "Zero" equity in a home loan of less than 2 years. You are still on a " probational" time frame and no lender will touch you until you have shown and proven yourself stable.

Answer 9

Who says?

You can indeed refinance. If your interest rate/finance deal is better and you have no restrictions on refinancing your first mortgage, go for it.