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You may have heard about the benefits of refinancing with a VA loan, such as how you can save money each month, or take cash out of your home’s equity to help with other expenses. This may sound too good to be true, but it’s not.
If you have a VA-backed home loan, learn about how refinancing your mortgage could benefit you and which option may be best. As a veteran, service member, or other eligible person, you have access to exclusive VA refinancing options.
A VA loan refinance can help you lower your interest rate and lower your mortgage payment. This option may be ideal if you are struggling to afford your current monthly payment. Another way refinancing can help, is that it allows you to take cash out by borrowing from your home equity. This is an excellent choice for those who need extra money to pay off other debt or expenses.
Continue reading to learn more about your exclusive VA refinancing options.
What are the types of VA loan refinancing?
If you meet the eligibility requirements, a Homefinity lender can help you get started on choosing which VA refinance loan is best suitable for you, whether it’s an Interest Rate Reduction Refinance Loan or a cash out loan.
Interest Rate Reduction Refinance Loan (IRRRL)
Sometimes referred to as a VA Streamline refinance, the IRRRL will help you secure lower interest rates and lower your monthly payments. Obtaining this loan is relatively simple as it requires less documentation.
The IRRRL tends to be popular because of the following benefits:
- Little paperwork required
- IRRRL interest rates are low
- Time and money are saved when an appraisal is not necessary
- You need little or no equity to refinance
- No or low closing costs
If you are eligible for a VA loan, this cash-out refinancing option is available to you regardless of the existing loan type you have, whether it’s VA, conventional, or FHA. If you are trying to tap into your home’s equity, this would be the option for you. The VA Cash-Out loan allows you to borrow money from your home by obtaining a new loan against the equity you have already paid into your home.
Some may qualify for borrowing up to 100% of their home’s equity. So, if you are looking to do home repairs, remodeling, pay down credit card debt, or other expenses, this would be the VA loan refinance to ask your lender about.
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What is the difference between refinancing a VA loan and a regular loan?
Refinancing your loan can save you money, lower your monthly payments, help you pay off your current loan faster, or allow you to cash-out some of your home’s equity.
Regardless of why you have decided to refinance, you will still need to choose what type of refinancing will benefit you the most. In many cases, if you are eligible for VA benefits, refinancing a VA loan may be simpler than refinancing a conventional loan.
VA loan rates tend to be significantly lower than conventional rates, making a VA loan refinance appealing to those who qualify.
It is also the only refinance program that allows you to take out up to 100% of your home’s equity.
Another difference between these types of loans is that you don’t need to pay monthly mortgage insurance for a VA loan, where a conventional loan may require this payment if you have less than 20% in home equity when you refinance.
With a conventional loan, income verification is required, as well as other paperwork, which makes this type of refinancing more difficult and time-consuming.
You will need an appraisal by choosing a conventional loan, which some may see as a burden and can affect how much financing you could receive.
One added cost that you will need to pay with a VA loan, and not a conventional loan, is a VA funding fee.
What is the process to refinance my VA loan?
Reach out to your lender
When you want to refinance your mortgage, you will need to go through the process of applying for a new mortgage. Start by connecting with a VA-backed lender, such as Homefinity to discuss your questions, options, and other details of your situation.
Meet VA requirements
When you’re ready to apply, you’ll need to meet the same VA eligibility criteria that you did with your current mortgage. This could include submitting a new Certificate of Eligibility (COE) or your lender may be able to access your previous COE.
Depending on whether you want an IRRRL or cash-out loan, you will need to provide details to your lender about your current financial situation, as well as your current mortgage. Refinancing your loan must be beneficial to your situation and help you financially.
Work toward closing with your lender
After you have qualified for the type of loan that will best suit you, your next step will be to close on your refinance mortgage. Your refinance closing will be similar to the closing of your current mortgage, where you will need to review and sign documents such as the mortgage agreement, as well as pay closing costs.
If refinancing is something you are interested in or have questions about, a mortgage officer can help you. Reach out to us today, and we will be happy to answer any questions and discuss your options.
VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Homefinity is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.
By refinancing your existing loan, your total finance charges may be higher over the life of the loan.