Can You Sell Your Home After Refinancing?

By PropertyClub Team
Jun 29th 2024
Yes, you can sell your home after refinancing as long as you don't have an owner-occupancy clause that requires you to live in the home for a certain period of time in your mortgage. 

hash-markTable of Contents

Selling Your Home After Refinancing Considerations
How Long Should You Stay in Your House After Refinancing?
Penalty For Selling a Home After Refinancing
How Soon After Refinancing Can I Buy Another Home?
Should I Refinance My Home If I Plan To Sell In 5 Years?
Selling After Refinancing Bottom Line

hash-markSelling Your Home After Refinancing Considerations

1. Prepayment Penalties

Some refinance loans come with prepayment penalties, which are fees charged if you pay off the loan early, including through selling the home. It's essential to check your loan agreement to see if there are any prepayment penalties and how much they might be if you want to sell your home after refinancing. 

2. Equity Considerations

You should also consider how much equity you have in the home if you want to sell it after refinancing. When you refinance, you may increase your loan balance, especially if you take out cash. If home prices have dropped or you haven't built up much equity, you might owe more on the home than it's worth, complicating the sale process.

3. Market Conditions

The real estate market can affect your ability to sell your home quickly and at a good price. If the market is slow or prices are declining, it might take longer to sell your home, and you may not get the price you need to cover your mortgage balance and closing costs.

4. Financial Impact

Consider the financial impact of selling your home after refinancing. Ensure that the proceeds from the sale will cover the outstanding mortgage balance, closing costs for the sale, and any applicable taxes or fees.

5. Loan Terms

Review the terms of your refinanced mortgage. Some loans may have specific clauses related to the time frame in which you can sell the home after refinancing.

hash-markHow Long Should You Stay in Your House After Refinancing? 

It depends on what it says in your new mortgage contract. When you refinance an existing loan, sometimes the agreement will have an owner-occupancy clause, which means you must use the home as your primary residence for a set period after refinancing. If there is an owner-occupancy clause, you may have to stay in the home for an additional 6 to 12 months after refinancing. 

There may also be a prepayment penalty, which is a fee for paying off the mortgage early. So read the contract or speak with your lender to determine the exact requirements. If there is no owner-occupancy clause or prepayment penalty in the contract, you can sell at any point. 

hash-markPenalty For Selling a Home After Refinancing 

Penalties for selling your home after refinancing can vary depending on the lender and the infraction. Violating the owner-occupancy clause is technically considered mortgage fraud and can result in your lender revoking your mortgage or requesting full payment on the loan.

However, the penalty is typically only used if a homeowner knowingly violates the clause by using the home as an investment property instead of a primary residence to get a better interest rate. But to be safe, you should call your lender to find out if you'd be violating the owner-occupancy clause by selling right after you refinance so you don't get in any trouble.

If there are prepayment penalties, you'll have to pay a fee to sell your home and repay the mortgage early. The fee is usually somewhere around 2% of the outstanding loan balance. Plus, you'll have to consider all the closing costs related to refinancing, which may make you think twice about selling right away. 

hash-markHow Soon After Refinancing Can I Buy Another Home? 

You typically won't be eligible for a new mortgage for at least six months after you refinance or 12 months after purchasing a new home unless you sell your current residence. So, say you were doing a cash-out refinance to buy a new property, you will have to wait at least six months before you'll be approved for another loan.

Plus, refinancing may impact your credit score, possibly affecting your ability to get a new loan. It will add a hard inquiry to your credit report, which can cause you to lose a few points. So, you may have to wait a while for your score to bounce back if you need to meet a specific minimum requirement.  

hash-markShould I Refinance My Home If I Plan To Sell In 5 Years?

You shouldn't refinance your home if you plan on selling soon, as it can take up to 5 years to cover the refinance costs. On average, a refinance will cost you $5,000, and you'll only save $100-200 per month by refinancing. 

If you have a very high interest rate or loan balance, you will start seeing the benefits of refinancing faster, but if your balance is under $200,000, it will take years for the refinance to pay for itself. 

hash-markSelling After Refinancing Bottom Line

You can typically sell your home after refinancing without much trouble, but it won't always make financial sense to refinance if you plan on selling in the near future. 

Before going forward and refinancing, it's best to think about your plans and carefully consider all the associated factors and potential costs. Doing thorough research and seeking professional advice can help you make an informed decision that aligns with your financial goals.