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Statistics show that most homeowners will not hold their original VA mortgage for the entire term of the loan. Today, refinancing is popular after owning a home for several years because easy online access to competitive mortgages has made this possible. With many questions surrounding this transaction, consider these 4 reasons you should refinance your VA loan.
1. VA Loan Rates are Low
Many homeowners will simply refinance because VA loan rates are low. When VA rates are lower than when the home was purchased, there is the opportunity to save money each month. This may be a good decision as long as the homeowner considers how long they will be remaining in the home. If it is expected to keep the home for a long period of time, then refinancing to a lower VA mortgage rate is definitely a good idea. If there are plans to move in the near future, you must first consider how much the refinance will cost and how long it will take to recoup those expenses, if any.
2. VA Loan Cash Out or Debt Consolidation
Taking cash out or using a refinance to consolidate debt is the same type of VA loan because it uses some of the equity in the home for the transaction. With a VA cash out refinance, the equity is taken and can be used for any reason such as home improvements, education expenses, debt consolidation, etc. It is important to know that the balance of the new VA loan will higher than the original mortgage. However, if the new VA loan rate is lower, there may not be much of a difference in the monthly mortgage payment.
3. VA Loan Term Reduction
When VA mortgage rates are low, it is common for homeowners to refinance to a shorter term loan. If the existing VA loan is several years old, the current VA loan rate may be lower and will result in the same or slightly higher monthly mortgage payment. When the loan term is shortened, the overall interest paid on the VA loan will be less which can result in a tremendous amount of savings for the homeowner.
4. Refinancing an Adjustable Rate Mortgage
When VA rates are low, it is the perfect opportunity to refinance an existing adjustable rate mortgage to a fixed rate mortgage. By doing so, the homeowner secures a low VA fixed rate that will remain for the entire term of the loan, thus eliminating rate adjustments and monthly payment surprises. A VA fixed rate mortgage provides the security of knowing that the monthly mortgage payment for principal and interest will remain the same as long as the mortgage is held by the homeowner.
Eligible VA homeowners have two options when refinancing:
The VA IRRRL is the Interest Rate Reduction Refinance Loan which is a VA streamline mortgage product. This is used when refinancing an existing VA loan with no cash out. Because it is most often used when refinancing to a lower VA mortgage rate, it is simple and quick to obtain.
VA Cash Out Refinance
The VA Cash Out Refinance is similar to other refinance products because it requires all of the documentation that is necessary with a new loan. While it is used for refinancing existing VA loans, it can also be used by an eligible VA borrower to refinance another type of mortgage into a VA loan.
Where To Find a VA Refinance
When considering a VA refinance, it is important to contact a knowledgeable VA lender who knows what options are available for all situations. Since VA loan rates are very competitive, consulting with a lender who utilizes a correspondent channel for loans is the best option since they will be able to offer you lower rates and costs as compared to a walk in lender. In today’s environment, most VA refinances are obtained using the internet since face to face meetings are no longer necessary. This also makes it extremely convenient for the borrower who is interested in refinancing, yet does not have the time to shop around.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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