The VA Home Loan Guaranty program offers an opportunity for eligible veterans, reservists, active duty military members, selected national guard members, and surviving spouses to purchase a home with no down payment and at a reasonable rate of interest. If you have a VA home loan at the moment, you may be thinking whether you can refinance it so that you could avail the lower interest rates. The short answer is yes, it is possible to refinance a VA home loan, but we shall look at this in detail in the following sections.
First, let us define what VA home loan refinance is all about.
A VA loan refinance is a process that enables one to refinance an original VA mortgage with a new VA loan. This is in a way of refinancing your existing VA mortgage by switching to a new one with different features – usually for the purpose of receiving a lower interest rate, lower monthly installments, shorter or longer loan period, cash-out or changing from an adjustable rate mortgage to a fixed-rate mortgage.
Similar to the initial VA loan, you do not need to make any down payment when applying for a VA refinance, and you will not have to worry about paying for PMI. To ensure the VA guaranty and other important benefits transfer to the new refinanced loan, you need to meet some specific guidelines.
Va refinance: who is eligible?
To qualify for a VA refi, you must meet VA loan eligibility requirements:To qualify for a VA refi, you must meet VA loan eligibility requirements:
• To be eligible, you have to be an eligible veteran or military reservist/ National Guard member or a qualifying military spouse.
• If the refinance is on a new home, the property must qualify for VA property requirements.
• Regarding an The Interest Rate Reduction Refinance Loan (IRRRL) is also one of the most common loan types., the borrower must make at least six monthly payments on the existing loan.
Also, your new VA loan would be subjected to some general requirements such as debt to income and credit score among others set by the lender in question. The specific refinance program that you apply for will also come with its own qualification requirements.
Types of VA Refinance Loans
The main types of VA refinance loans are:The main types of VA refinance loans are:
1. Interest Rate Reduction Refinance Loan (IRRRL)
An IRRRL allows qualifying homeowners to refinance their current VA loan to a new VA loan at a lower interest rate with minimal documentation. It also leads to lower monthly payments in relation to your mortgage and may possibly decrease the span of your loan.
You can also withdraw some cash – up to $6,000 – to pay for the loan expenses or even make some repairs to the property. The amount of your new loan cannot be more than the payoff amount of your current VA mortgage.
2. Cash-Out Refinance
In the VA cash-out refinance option, you use a new and hence longer term VA loan to pay off your current VA loan while taking out the difference between the two as cash. It enables you to leverage the value of your home for things like debt consolidation, home improvement, college tuition and other necessities.
It’s possible to pay more than with other types of refinance to stop a foreclosures process. This is usually in the region of 90% Loan to Value (LTV) or less.
3. Streamline Refinance
VA streamline refinance is the most basic and shortest method to refinance an existing VA home loan. It reduces paperwork and underwriting. Nevertheless, a streamline refinance can only be used for a limited purpose and it cannot be used to take out cash or pay off other debts.
Advantages of refinancing of your VA home loan
Refinancing a VA mortgage into a lower interest rate loan can provide the following advantages:Refinancing a VA mortgage into a lower interest rate loan can provide the following advantages:
• Lower monthly payments
• Lower interest paid over the loan period
• Reduced loan tenure
• Consumers often try to combine their debts with high interest rates.
• Money to spend on new kitchen, new furniture, remodeling the house, etc.
• Stability of rate and/or payment with fixed rate of interest refinancing
You get to keep all of the main characteristics of the VA loan program when you decide to refinance, including the fact that you are allowed to purchase a home without making a down payment. Like with any form of refinancing, you should think of the costs that are involved against the difference in interest rate as well as other advantages in order to ensure that it makes economic sense depending on how long one intends to live in the home.
In a nutshell, the answer is yes – it is possible to convert an existing VA home loan to a new VA loan, keep all the principal VA features, and possibly benefit financially. As long as you meet minimum requirements to be classified as a veteran and meet the requirements of the refi program the process is the same as getting a new purchase mortgage. Please contact a lender approved by VA to discuss the options to suit you.
