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If you have a VA home loan, your lender received a guarantee of your mortgage by the U.S. Department of Veterans Affairs (VA). You qualified for a VA home loan because you are or were a military service member, or you are the spouse married to or having survived an active military service member.) If it’s time to refinance your VA home loan, you have special options open to you.
Being able to refinance your loan when interest rates drop or you need to access cash equity can be critical for your financial health. Homeowners can refinance VA loans using several different approaches depending on their needs.
VA loans are unique in that you can obtain 100% financing for the total value of your home, with no down-payment required. The federal government backs your home loan, giving your lender an incentive to work with you to put you in the home of your dreams. However, interest rates still apply, and these can fluctuate over time.
There are two main types of VA home loan refinance options. A streamline refinance allows you to take advantage of new, lower interest rates. A cash-out refinance allows you to access equity in your home in the form of a cash payout, at much higher percentage than is typically available with a traditional home equity loan.
Our loan officers can review your current home loan, and help you find out which type of loan you qualify for and what the right move is when it comes to a VA refinance. You might be able to save significantly by adjusting your loan term, or walk away with much-needed cash in your pocket.
An Interest Rate Reduction Refinance Loan (IRRRL), also referred to as an Earl mortgage or streamline loan, is designed to help you take advantage of dropping interest rates. Many VA loans are fixed rate loans, meaning you pay the same interest rate for the life of the loan. If you obtained your VA home loan when rates were high, and the market shifts, you could end up paying way more in interest than other homeowners.
An IRRRL can help you get a lower interest rate and change the loan term. If you are in a good financial position, you might want to shorten your loan term in order to cut a large amount of interest off of your loan (you’ll pay a little more per month for each year you shorten your loan term.) If you’re struggling, you can reset your loan term to lower your monthly payment, even though you’ll end up paying more in the long run.
You may need to pay a VA funding fee, but this can often be rolled into the loan so you don’t have to come up with any funds up front.l You’ll also need your original Certificate of Eligibility (CoE) that was used to obtain your current VA loan.
A VA Cash-Out Refinance Loan is designed to help you access the equity in your home. Unlike a conventional home loan, which only allows homeowners to access up to 80% of their home equity, or a home equity loan, which can often perform almost like a line of credit, a VA cash-out loan lets you take advantage of 90% of your home’s equity.
You can refinance your VA loan, or refinance a conventional loan into a VA loan if you are eligible. The closing costs and interest rates for VA loans are typically lower than for conventional loans. Refinancing with a VA cash-out option can help you get through a tight spot by providing the money you need for home repairs, a vehicle, or living expenses during a hard time.
You may need to pay a VA funding fee at closing. Your lender will tell you if this can be deducted from your cash-out amount or if you’ll have to pay it out of pocket.
If your interest rate is already low, and you aren’t in desperate need of cash, you may not want to take advantage of your VA refinance options at this time. You could be better served by waiting for interest rates to drop still lower, or for a time when you have an emergency and need to be able to access your home equity in a hurry.
However, if you obtained your loan when interest rates were significantly higher than the current rate, have an adjustable rate mortgage you want to convert to a fixed rate, or want to change your loan term, now could be the perfect time to apply for a VA home loan refinance using IRRRL.
If you find yourself in a financial crunch, whether it’s due to changed circumstances, job loss, a medical issue, or other emergency, you can use a cash-out VA refinance to help support yourself and pay unexpected bills. You could also use this chance to convert a conventional home mortgage into a VA-backed loan.
At Sammamish Mortgage, our goal for each mortgage-seeker or homeowner looking to refinance is the best loan terms possible. Our team of mortgage experts can help you find the best way to refinance your VA home loan. We’ll help you identify what documentation you need, and what requirements need to be met to qualify.
Then we’ll walk you through your options and the costs associated with each kind of VA refinance. We believe you need all the facts, including projections of the costs involved with your refinance and what savings you can expect over the life of your new loan. Once you know whether you need an IRRRL or a cash-out loan, your loan officer can help you complete the application process to refinance your VA home loan.
Sammamish Mortgage has been in business since 1992, and has assisted many home buyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon and Washington.
Contact us if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.
The HARP program was introduced years ago as a means to help homeowners who were either underwater on their mortgage or had little to no equity in their homes. But this program is no longer in effect. But a replacement still is – the HLRO program – which may still help with refinancing and may come with easier qualifications.
You may be able to get rid of that expensive mortgage insurance without refinancing if your loan is in good standing, and it was opened before June 2013, among other requirements.