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When it comes to how refinancing works with a VA Streamline, your monthly payments often decrease. Lower monthly payments may result from an extended term on the loan, which allows more time to pay on your mortgage. A lower interest rate could also result in a lower monthly payment if the length of the loan is held equal.
As a reminder, refinancing with a VA Streamline could allow you to move from an adjustable-rate mortgage to a fixed-rate loan. ARMs change over time, depending on rate fluctuations. Fixed-rate mortgages lock in a single interest rate until you pay off your loan.
Mortgages with adjustable rates often see higher interest rates over time. You can often save more money in the long term by refinancing an ARM, even if you initially take a higher interest rate when you switch from an ARM to a fixed-rate mortgage.
But there are special expenses (those funding fees) and certain limits. Ultimately, you must consider the costs that come with these loan products to determine if refinancing into a VA-backed loan is a smart financial move.
When refinancing from a fixed-rate VA loan, your new interest rate must be at least 50 basis points less than the original rate, to comply with the Protecting Veterans from Predatory Lending Act of 2018. If you refinance from a fixed-rate to an adjustable-rate loan, the new loan must be at least 200 basis points less.
You can sometimes lower your monthly VA loan payment by refinancing it at a lower interest rate or by changing from an adjustable-rate to a fixed-rate loan. Whatever the reason for refinancing your VA mortgage, you should consider the pros and cons as they apply to your situation.
Because your mortgage interest rate is determined partially based on your FICO credit score, if you know your credit score has improved considerably since your mortgage loan was signed, it makes sense to consider refinancing your mortgage. The improved credit score should offer a better interest rate. The good news is that being approved for a mortgage can improve your credit score over time, as long as you make regular payments.
If you have an ARM, you may find your interest rate is higher than current fixed mortgage rates. In this case, you will probably benefit greatly by refinancing your mortgage and getting a lower, fixed-interest rate.
Shop for the best mortgage rates. We recommend searching a variety of options before refinancing your mortgage. Some great places to shop for good mortgage rates include Quicken Loans and Lending Tree. We also have a mortgage comparison table on our site.
4. Consider all loan terms. Many borrowers are refinancing into a 30-year fixed mortgage instead of considering other options such as a 20-year or 15-year fixed rate, which would shorten the life of the loan and significantly reduce the amount paid to interest. Here are the pros and cons when comparing 15 and 30-year mortgages.
7. Underestimating the time commitment. Refinancing your mortgage can be time intensive, depending on several factors, such as how much you owe on your home, whether or not there are multiple liens on the home, time of year, whether or not you are self-employed, and other factors. Be prepared to take a few days to compare mortgage rates, get your home appraised, and schedule the closing. The actual paperwork can take a couple of hours depending on all of the above factors. My wife and I used a VA Loan to buy our home, which has a specific process for buying and refinancing. Thankfully, refinancing with a VA Streamline Refinancewas fairly easy.
For qualified borrowers with strong credit history and an anticipated long-term stay at their home, refinancing a VA loan can make a lot of sense. But why exactly should you refinance with a VA loan? Here are some of the benefits that this process has to offer:
The U.S. Department of Veterans Affairs offers two options for refinancing your mortgage: a streamline refinance and a cash-out refinance. Both are more generous than many other home loans. You also have the option of refinancing into a conventional loan.
Another reason you might want to refinance to a conventional loan is to restore your full VA entitlement. Then, you can use a new VA loan to purchase your next primary residence and the home you are refinancing as an investment property.
Select a product to view important disclosures, payments, assumptions, and APR information as some rates may include up to 1.0 discount point as an upfront cost to borrowers. Rates for refinancing assume no cash out. Please note we offer additional home loan options not displayed here.
With all this talk of saving money and getting cash to pay for necessities, you may wonder why people ever hesitate? There are two sides to every story, and there are important things to consider whenever you think about refinancing your home. Below are some of the big ones.
Depending on what your motivation is for refinancing, both options are excellent choices. National VA Loans is here to help you decide exactly which refinance option is best to fit your needs. For more information, call us at 855-956-4040.
A VA IRRRL is a specific refinancing program for people with a VA home loan. If you are eligible and approved, an IRRRL will lower your monthly payment by lowering your interest rate. Or, it will make your monthly payments the same by changing your adjustable or variable interest rate to a fixed interest rate.
To determine if the maximum cost recoupment period of 36 months is met, the proposal provides for dividing the sum of the fees, closing costs and expenses incurred by the veteran to refinance the existing loan, whether paid in cash or financed, by the dollar reduction in the monthly principal and interest payment, with the result reflecting the number of months it will take to recoup the refinancing costs. For example, if the applicable costs are $3,600 and the monthly principal and interest payment is reduced by $100, the result would be 36, and the maximum recoupment period would be satisfied. The costs to refinance would not include (1) the VA funding fee, (2) prepaid interest and amounts held in escrow, and (3) taxes and assessments on the property, even when paid outside of their normal schedule, that are not incurred solely due to the refinance transaction, such as property taxes and special assessments. If the monthly payment of principal and interest on the new loan will be equal to or greater than the monthly principal and interest payment on the existing loan, such as when the veteran will refinance a 30-year loan into a 15-year loan, the veteran could not be charged any fees, closing costs or expenses, other than the excluded items listed in the prior sentence.
In addition to home purchase loans, the Department of Veterans Affairs also guarantees refinancing and other types of home loans and grants. AmeriSave can help you identify and apply for the program that best matches your needs and qualifications, such as:
You must live in the home you are purchasing or refinancing as your primary residence and have a Certificate of Eligibility, which can be obtained from Veterans Affairs here. You must also meet income requirements to show you can meet the expected monthly obligations and have a credit score of 600 or better, depending on the loan amount (640 for loans of $700,000 or more.)
There are several reasons why current VA homeowners may want to take advantage of a VA Streamline Refinance. The most common is that an IRRRL lowers your interest rate by refinancing your existing VA home loan. Simply put, a lower rate means , in most cases, your monthly mortgage payment should decrease.*
Wondering if you are eligible? To benefit from VA loans, applicants must obtain a certificate of eligibility from the Department of Veterans Affairs. Then, once certified, VA members can apply to use the guaranty for financing or refinancing options such as:
In their Circular 26-19-05, the VA clarified policies regarding cash-out refinancing loans, including refinancing of construction (construction-to-perm) loans. The VA will update IRRRL regulations in an upcoming rulemaking. This rule became effective on February 15, 2019. The circular addresses new requirements for: 1) loan-to-value requirement on refinance loans; 2) net tangible benefit test; 3) loan seasoning; and 4) fee recoupment;
Fee Recoupment applies to Type I refinancing loans. The recoupment of fees, expenses and closing costs cannot exceed 36 months from the date of loan closing. Closing costs include those paid outside of closing. Fees excluded from the computation are discussed in the Circular and the Circular provides examples of computations. 781b155fdc