Veterans and military homeowners can refinance their VA loan to secure better interest rates and reduce their monthly payments. This can also help manage housing expenses and fund home improvements. This will lighten their budget and leave money aside for other personal finance needs.
Types of VA Home Loan Refinance Programs
There are two main types of VA refinance loans: VA streamline refinance (IRRRL) and VA cash-out refinance.
VA Streamline (IRRRL) Refinance
Also know as a Streamline refinance, the Interest Rate Reduction Refinance Loan (IRRRL) option is great for existing VA loan holders who are looking to realize significant savings.
Veteran homeowners might not need to meet a credit score benchmark or debt-and-income requirements.
VA Cash Out Refinance
AÂ VA cash out refinance is an option for those with a VA or conventional loan looking to take advantage of their home’s equity to access cash for home improvements, emergencies, pay off debt, or any other purpose.
This refinance loan looks a lot like a typical VA purchase loan when it comes to underwriting, including meeting a lender’s credit score minimum, DTI ratio guidelines and more.
VA Streamline refinance (VA IRRRL) vs VA Cash-Out refinance
| Feature | VA Streamline Refinance (VA IRRRL) | VA Cash-Out Refinance |
|---|---|---|
| Purpose | Refinance an existing VA loan at a lower interest rate. | Refinance to a VA loan, access home equity, and get cash. |
| Eligible properties | Primary residence, investment property, or second home (varies by lender). | Primary residence, investment property, or second home. |
| Eligibility | Must have an existing VA loan Current on monthly payments for the last 6-12 months Mortgage must be at least 270 days old |
Available for VA and non-VA loans with a valid Certificate of Eligibility (COE) |
| Requirements | No credit score requirement No income verification required No appraisal needed |
Typically requires a credit score of 620+ Debt-to-income ratio under 50% Appraisal required |
| Benefits | Potentially lower monthly payments Fixed interest rates No appraisal needed No cash-out allowed |
Potentially lower interest rates Cash-out for debt repayment, home improvements, etc. |
| Closing costs | Can be rolled into the loan | Includes closing costs, appraisal, and a VA funding fee (can be rolled into the loan) |
| Cash-out option | Not allowed | Allows cash-out for various needs |
VA Refinance Eligibility
To be eligible for the VA refinance, you would require more than 90 consecutive days during wartime or more than 181 days of service during peacetime.
If you’re from the National guard or the reservists, then you should at lest have served six years, or 90 days on Title 32 orders, 30 of which must have been consecutive.
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How soon can you refinance a VA loan?
Generally, you can’t refinance until 210 days after the first mortgage payment was due, and you need to have made at least 6 monthly on-time payments.
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Benefits of VA Refinancing
There are several benefits of refinancing with a VA loan. Here are some of the key advantages:
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Lower interest rates
VA refinancing often offers lower rates compared to conventional refinancing.Â
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No private mortgage insurance (PMI)
VA loans do not require PMI, even if the homeowner refinances more than 80% of their home’s value.
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Minimal upfront fees
VA streamlines, in particular, typically feature minimal cost and fees. Although the VA funding fee is still required for refinancing, it may be rolled into the closing costs, and some veterans may even be exempt from paying it. Plus, the funding fee on a VA Streamline is 0.5%.
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Flexible credit requirements
VA refinancing typically has more lenient requirements compared to other refinancing options.Â
No prepayment penalties
VA loans do not have prepayment penalties, allowing borrowers to pay off their mortgage early without any extra fees.
Bottom Line
VA home loans offer veterans the chance to secure housing with lower rate and favorable terms. By refinancing their existing VA mortgage you an unlock these benefits and reduce their monthly mortgage insurance payments.Â
Additionally, exploring options like a home equity loan or a standard cash-out refinance can offer financial flexibility. Whether you’re looking to refinance your current VA loan, understanding the right type of refinance for your situation is crucial.Â
Borrowers can also explore a VA refinance loans to enjoy the benefits of lower rate provided by the federal government, as showcased on federal government websites. And veterans in need of assistance, a home equity line, or a line of credit can reach out to the crisis line for support and guidance.Â
It’s essential to review all costs and fees with your mortgage lender to understand the total amount and how it affects or benefits your monthly payments. Let us guide you through the VA refinance loan process. Contact us today to find the best mortgage refinance program for your needs and explore the pros and cons of your refinancing options. We are grateful for your services to the country.
Frequently Asked Questions
Who is eligible for a VA refinance loan?
Eligibility for a VA refinance loan typically requires prior use of your VA loan benefits to purchase a home. For a VA streamline refinance, you must be refinancing an existing VA loan. For a VA Cash-Out Refinance, you need to meet VA refinance and underwriting requirements, including having a valid Certificate of Eligibility (COE) and meeting the VA’s service requirements
Are there any closing costs associated with a VA refinance loan?
Yes, there are closing costs for VA refinance loans. However, with a VA Streamline Refinance, some costs can be included in the loan amount, minimizing out-of-pocket expenses.
Is refinancing free with a VA loan?
No, refinancing with a VA loan typically involves closing costs, but some costs can be rolled into the loan amount.
What is today’s VA refinance rate?
VA refinance rates fluctuate daily based on market conditions, creditworthiness, loan terms, and lender policies. For the latest rates, consult reputable lenders or financial institutions.
Is VA refinancing worth it?
Whether VA refinancing is worth it depends on factors like current interest rates, your plans for staying in the home, and financial goals. If you can lower your interest rate, reduce monthly payments, or access home equity, it may be beneficial. Consider the costs, benefits, and your long-term objectives before deciding.
How does a VA refinance work?
A VA refinance allows veterans to replace their existing mortgage with a new loan under better terms, thanks to their military services. They can can help reduce interest rates, lower monthly payments, and access home equity.
