Last Updated on July 27, 2022 by Luke Feldbrugge
There are several options to refinance a VA loan every military member should know about. If you are currently paying on a VA loan and are thinking of refinancing to take advantage of lower interest rates, then this post has you covered. Taking the steps to refinance a VA loan may save you thousands of dollars over the life of your loan.
Who better to walk you through the steps to refinance VA loans than a Homes for Heroes mortgage and loan specialist? Homes for Heroes has the largest network of real estate and lending specialists that give discounts to heroes like you, our military members (active, reserve, national guard and veterans). Sign up today and we’ll connect you with a mortgage specialist in your area that can walk you through the refinance process, provide you with options, and get you on your way to savings. There is no fee to you, no obligation, just savings for you and your family. It’s our way of saying thank you.
Refinance VA Loan Interest Rates
Interest rates are at or near all time lows. That makes now a great time to refinance VA loans, or any other type of home mortgage. Average 30 year mortgage rates are under 3%. If you bought your home in the last few years, you probably have an interest rate anywhere between 4-6%. Refinancing to a lower rate can save you tens of thousands of dollars over the remaining life of your loan. For example, if your loan is for $250,000 and your interest rate is 5%, lowering your interest rate by even 1% will save you over $53,000 over a 30 year period. That’s a lot of money!
Options to Refinance VA Loans
Interest Rate Reduction Refinance Loan (IRRRL)
If you already own your home with a VA Loan and are looking to refinance, you can take advantage of the Interest Rate Reduction Refinance Loan (IRRRL). Basically, this loan gives you the option to lower your interest rate with no appraisal or underwriting requirements. This is where the streamline nickname comes in.
One advantage of a IRRRL refinanced VA loan is that your monthly payment will be lower because of the reduced interest rate. You can also stabilize your payments by transitioning from an adjustable or variable rate loan to a fixed loan. Both of these options can save you thousands of dollars over the life of the loan.
You will still need to pay closing costs to refinance under the IRRRL terms. However, you may be able to bundle some or all of these fees into your loan amount, meaning you won’t need to pay them upfront at your closing. Your lender will also need to see the original Certificate of Eligibility (COE) that you used to get your original VA loan, but you will not need to provide a new COE.
To be eligible for a IRRRL all the following requirements of the Department of Veterans Affairs must be true:
- Already have a VA-backed home loan
- Are using the IRRRL to refinance your existing VA-backed home loan
- Can certify that you currently live in or used to live in the home covered by the loan
A cash-out refinance takes your current mortgage and replaces it with a new mortgage for a larger amount. The difference between your new mortgage and the amount of your original mortgage is then given to you as cash. In order to get a cash-out refinance, you must have some equity built up in your home. Since this is technically a new loan, your loan terms, usually 15 or 30 years, will also restart. Your monthly payment will also typically increase since the amount of the loan is larger than it was. Keep these things in mind when applying for this type of refinancing.
Let’s say that you bought a home before you were eligible for a VA loan. If you are currently financing your home with a conventional, FHA, or any other type of non-VA loan, you can refinance into a cash-out refinance loan. If you did not apply for a COE for your current home because it was not required for your type of loan, you’ll need to apply for one now to be eligible for this type of refinance loan.
A cash-out refinance loan can also be a good option if you are looking to remodel or renovate your home. Or maybe you are looking to pay down debt or medical bills. Just remember that whatever additional money you take out in a cash-out refinance must be paid back.
To be eligible for a cash-out refinance loan, all the following must be true:
- Qualify for a VA-backed home loan Certificate of Eligibility
- Meet the VA’s and your lender’s expectations for credit score, income, and any other requirements
- Must live or plan to live in the home you’re refinancing with the loan
If you’re ready to refinance, or have questions about the process, sign up with Homes for Heroes today. We’ll get you in touch with mortgage and lending specialists who are versed in refinancing VA loans.