How Long Must You Stay in a Home After Refinancing?

by Melvin Richardson ; Updated July 27, 2017

You can move any time you want after refinancing your home. However, if you move out too soon, you might not be able to recover your refinancing costs, which can be a costly mistake.

Refinancing Costs

You incur certain costs when you refinance, such as an appraisal fee, title insurance premium, credit report fees and closing costs. These costs can be rolled into the loan to help you avoid out-of-pocket expenses.

Time Frame

If you move within the first two years, you might not have a chance to recoup these expenses. This time frame is determined by your refinancing costs and the amount you save on each monthly payment.

Recovering Expenses

To determine how long it would take to recover your expenses, take the difference between your original monthly payment and your new payment and divide that into your total costs. If your original mortgage payment was $1,200, your payment after refinancing is $1,100 and refinancing cost you $3,000, it would take 30 months to recover your fees and expenses ($3,000 / $100 = 30 months).

Equity

If you reduce your interest rate during the refinance, you will build equity faster, so the longer you stay in the home, the more equity you will build. The more equity you have in your home, the larger your profit will be when you sell.

Prepayment Penalty

There might be prepayment penalty included in the terms of your refinance, and this should factor into your decision as well.

About the Author

Melvin J. Richardson has been a freelance writer for two years with Associated Content, and writes about topics such as banking, credit and collections, goal setting, financial services, management, health and fitness. Richardson has worked for several banks and financial institutions and gained invaluable experience and knowledge. Richardson holds a Master of Business Administration in Executive Management from Ashland University in Ashland Ohio.