Quick answer
Yes, you can refinance a one-time close construction loan. Once construction ends and the loan becomes permanent, you’re eligible to refinance—whether to lower your interest rate, change loan types, or tap into equity.
Most borrowers wait 6–12 months before refinancing, but options depend on your original loan program and financial goals.
What is a one-time close construction loan?
A one-time close construction loan combines land purchase (if needed), construction financing, and permanent mortgage into a single loan with just one closing.
After construction is complete, the loan automatically converts into a standard mortgage, typically with a fixed rate and a monthly payment structure.
Because there’s no second closing, many borrowers assume refinancing isn’t possible.
However, you can refinance a one-time close loan once the construction phase is complete and the loan converts to a permanent mortgage.
Why refinance a one-time close loan
There are several reasons why a borrower might want to refinance their one-time close construction loan:
- Interest rates have dropped since the original loan was locked
- Property value increased after construction
- Want to switch from an FHA or VA to a conventional loan
- Desire to remove mortgage insurance (PMI/MIP)
- Looking to pull out equity via a cash-out refinance
- Credit score has improved since loan approval
Each of these scenarios can make refinancing financially beneficial, especially after the required seasoning period (typically 6–12 months post-conversion).
Example scenarios where refinancing makes sense
Scenario 1: Rate drop post-construction
You locked a 7.0% interest rate in 2023 for your one-time close FHA construction loan.
By 2025, the average 30-year fixed rate is expected to fall to 5.5%. Refinancing to a new, lower rate could save you hundreds of dollars each month.
Scenario 2: Switch from FHA to conventional
You used an FHA one-time close loan to build your home. Now that your home has appreciated, you qualify for a conventional refinance and can eliminate monthly mortgage insurance.
Scenario 3: Use equity for renovations
Your barndominium’s value increased after completion. You refinance and pull out $40,000 to build a detached garage or finish interior upgrades.
When to Refinance After Construction
You must wait until the construction phase ends and the loan converts to permanent financing. After that, the refinance timeline depends on the loan type:
| Loan Type | Typical Refinance Waiting Period |
| FHA One-Time Close | 6–12 months for cash-out; no wait for streamline |
| VA One-Time Close | No wait for VA IRRRL; 6+ months for cash-out |
| USDA One-Time Close | 12 months are usually required |
| Conventional | Often 6 months for standard refinance; up to 12 for cash-out |
Check with your lender about “seasoning” rules specific to your original loan.
Steps to refinance your one-time close loan
Refinancing after a one-time close loan follows the same general steps as any mortgage refinance:
- Check your current mortgage details: Review your existing loan balance, interest rate, and monthly payment. Confirm when your loan is converted to permanent financing.
- Assess current interest rates and refinance options: Determine if today’s rates are lower than your current rate. Explore fixed vs adjustable options, or cash-out possibilities.
- Determine your home’s current value: An appraisal is often required to determine your equity. You typically need at least 20% equity for a conventional refinance without mortgage insurance.
- Review your credit and income: Refinancing typically requires updated credit, income, and verification of your debt-to-income ratio. Higher scores may lead to better terms.
- Choose a lender and apply: You can use your original lender or shop around for a better rate. Submit your refinance application with income docs, home details, and other required forms.
- Complete underwriting and close: Once approved, you’ll sign new loan documents, pay any closing costs (or roll them into the loan), and officially replace your original mortgage.
Should you choose rate-and-term or cash-out refinancing
When refinancing a one-time close construction loan, you’ll typically decide between two primary options:
1. Rate-and-term refinance
This popular option replaces your original mortgage with a new one, usually to:
- Lower your interest rate
- Reduce your monthly payment
- Change your loan term (e.g., from 30 to 15 years)
This does not increase your loan amount beyond closing costs. It’s ideal for borrowers who want to save money over time without withdrawing equity from the home.
2. Cash-out refinance
With this option, you replace your current mortgage with a larger loan and receive the difference as a lump sum. Many homeowners use this to:
- Consolidate debt
- Fund major home improvements
- Invest in other real estate or retirement
Most lenders require you to have at least 20% equity remaining after the cash-out. Interest rates can also be slightly higher compared to rate-and-term refinances.
Choosing the right option depends on your goals
- If your priority is a lower monthly payment or faster payoff, a rate-and-term refinancing is likely the best option.
- If you need funds and have equity available, cash-out refinancing may be a worthwhile consideration.
FAQ: Can I refinance my one-time close construction loan
Q: Can I refinance an FHA one-time close construction loan?
A: Yes. After your loan converts to a permanent mortgage, you may qualify for either an FHA streamline refinance (no appraisal required) or a conventional refinance. If you have sufficient equity, refinancing into a conventional loan can eliminate monthly mortgage insurance.
Q: Can I do a cash-out refinance after a one-time close loan?
A: Yes, but usually after a 6–12 month waiting period. You’ll need to have significant equity (often 20% or more) and meet specific credit and income qualifications. A new appraisal is required.
Q: Do I need to use the same lender to refinance?
A: No. You can refinance with any qualified lender. It’s often smart to shop around for the best rate, terms, or loan program once you’re out of the construction phase.
Q: Are there closing costs when refinancing a one-time close loan?
A: Yes. Refinancing typically includes closing costs such as lender fees, appraisal fees, title charges, and potentially escrow setup fees. Some lenders allow you to roll these into the loan.
Q: Can I refinance if I used a VA or USDA one-time close loan?
A: Yes. VA borrowers may qualify for an IRRRL (Streamlined Refinance), and USDA borrowers can refinance after meeting specific eligibility and property value criteria. Each program has its own requirements.
Lower your rate or access equity with GoMortgage
Refinancing after a one-time close loan can help you reduce your monthly payments, eliminate mortgage insurance, or tap into your home’s equity. Whether you used an FHA, VA, or conventional construction loan, GoMortgage can guide you through your next move.
Our team helps homeowners:
- Compare refinance options after construction
- Evaluate rate and term vs cash-out scenarios
- Navigate credit, equity, and loan program changes
See how a one-time close construction loan refinance could benefit your financial future. Get started with GoMortgage today.