VA Loan Refinance Options
The VA refinance loan program offers a great deal more flexibility than conventional refinance loan programs. Because of this, VA-eligible borrowers have a lot more options and a lot fewer restrictions when it comes to the va loan refinance. VA refinance loans can help reach many different goals, including getting a lower monthly payment, consolidating other non-mortgage debt like credit cards, making improvements to your home, or even to pay off your home more quickly. There are specific VA home loan refinance options that are optimized for each of these situations.
The two most popular options for veterans is the VA Cash Out and the VA Streamline (IRRRL) refinance.
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VA refinancing involves repayment of your current real estate debt from the proceeds of your new VA mortgage, with the same borrower(s) and the same property. This is called a “Cash Out” Refinance.
Cash-Out Refinancing is available for homes that are used as your principal residence. A veteran-owner can refinance up to 90% of the appraised value (not available in Texas) plus the funding fee and the cost of any energy efficient improvements up to $6,000 if the property can withstand the designated loan to value ratio.
Cash Out Refinance facts
- There is no minimum amount of time that you must own your home, yet your home must have sufficient equity to qualify for VA Refinancing.
- A cash-out loan may be made to refinance the outstanding balance of an existing mortgage, but can also include other debts (the first mortgage must be included in the refinance).
- The veteran can receive cash proceeds from the loan for any purpose acceptable to the lender.
- Existing mortgage loans or other liens of record may be refinanced whether they are in a current or delinquent status, but refinancing loans are subject to the same income and credit requirements as regular home loans.
- Major Home Repairs
- Emergency Expenses
- Upgrade Your Kitchen
- Tuition & Books
- Remodel the Bathroom
- Remodel the Bathroom
The VA Streamline Refinance loan (officially called the Interest Rate Reduction Refinancing Loan, or IRRRL) is the simplest and most popular VA refiance loan option.
A VA Streamline Refinance (IRRRL) allows you to refinance your current mortgage at a lower interest rate than you are currently paying. In fact, except when refinancing an existing VA guaranteed adjustable rate mortgage (ARM) to a fixed rate, the Streamline Refinance or IRRRL must result in a lower interest rate (when refinancing from an existing VA ARM loan to a fixed rate VA loan, the interest rate can increase).
The IRRRL is available to veterans who want to refinance their original VA Home Loan, and utilized their original eligibility when they purchased it.
“No Cost” Streamline Refinancing even lets veterans refinance VA mortgages and incur no out-of-pocket expenses. Your lender can pay your costs, in exchange for a higher interest rate. Or you can roll the closing costs into your new Streamline Refinance Loan. The Streamline may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs (as long as the interest rate on the new loan is lower than the rate on the old loan…unless you are refinancing an ARM to a fixed rate mortgage).
Benefits of VA Streamline Refinance loan
- No appraisal requirement*
- Reduced credit score standards
- No disclosure of income or assets
- No out of pocket closing costs
- Up to $6000 available for Energy Efficient home improvements
- Opportunity to defer two months mortgage payments
- Cash refund of available escrow balance
|Amount Paid In Interest||Total Savings over 30 years|
|150K 0.5% lower interest||$19,033.75|
|150K 1% lower interest||$32,696.48|
|250K 0.5% lower interest||$31,254.16|
|250K 1% lower interest||$54,494.12|
|350K 0.5% lower interest||$43,755.83|
|350K 1% lower interest||$76,291.77|
|450K 0.5% lower interest||$56,257.50|
|450K 1% lower interest||$98,089.43|
Today’s interest rates are at competitive levels, and with a reduction of just a half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan.
* Based on information we are receiving from lenders, appraisals may indeed be required on VA loans in the very near future. Therefore, the window of opportunity to refinance without an appraisal may be closing quickly
How to Get a VA IRRRL
IRRRLs are designed to be simple affairs, and quite frankly the only step that you really need to take is to sit down with your lender and explain you want to apply for an IRRRL. Your lender will walk you through all of the steps required to apply.
Steps for a Interest Rate Reduction Refinance Loan
- Tell your lender you want to get an IRRRL.
- Contact other lenders to see if there are differences in the terms they will offer you.
- Provide your occupancy certification and any other requested documentation to the lender that will offer you the best terms.
- Make it clear whether you will want to get an EEM and decide if you are going to roll closing costs into the loan amount.
- Wait for underwriting and respond with any requested documents.
- Close with the title company.