WHEN TO REFINANCE YOUR VA HOME LOAN
Learn about when to refinance your VA home loan .
A refinance is a new loan on the property. You must own the home your are refinancing. There may currently be a loan on the property (or several loans) or you can own it free and clear. For a VA streamline (IRRRL) you cannot ‘cash out’ so there must be a current first mortgage VA loan on the property that will be paid off in the refinance. If there is no loan on the property you maybe able to utilize a standard VA refinance but it will not be a streamline loan so full qualifications and appraisal will be required.
There are many reasons to consider refinancing. Below is a list of common reasons which may help you decide if refinancing is right for you.
If you currently have a VA loan on the property you want to refinance when mortgage interest rates are below the rate on the loan you currently have on the property. It is a common thought that when rates are 2% below the current rate on your property it is wise to refinance. When it comes to a VA streamline refinance that is really not true. Since the rule changes the borrower’s closing costs are paid by the lender so the loan rate dropping just .5% could save dramatically over the life of the loan since fees are not ‘rolled’ into the loan.
A streamline loan may also be a good idea if you currently have an adjustable rate mortgage. Locking into a fixed rate will allow you to never worry about rate/payment adjustments.
You may also decide to streamline when if you would like to reduce the term of the loan. Dropping the number of years over the life of the loan can save $1,000’s.
If you currently are VA eligible but do not have a VA loan on the property it may be best to do a standard VA refinance.
Unlike the streamline this loan would require full asset, income, credit and appraisal information. There are underwriting requirements and guidelines that borrower(s) must meet.
Cash out VA refinances are used when borrowers have to pay off multiple loans attached to the property, consolidate debt in the home loan, do home improvements, get cash. This loan also requires full borrower(s) documentation and home appraisal done by a VA approved appraiser.
What is the best refinance option for you? Think about your goals and then speak with a VA approved lender. The lender will be able to review your specific loan type and qualification and help determine what is the best way to move forward.