VA Refinancing Options
VA Mortgage Refinancing
VA home loan refinancing options.
Veterans who qualify for a VA loan will have the pleasure of receiving what is likely the most favorable financing terms in the entire country.
The two refinancing programs that are available to veterans are as follows:
IRRRL – Interest Rate Reduction Refinance Loan
The IRRRL is also known as the “VA streamline refinance“. This program is an excellent option for those who are looking to lower their interest rate and mortgage payment and to do so with ease and low fees. Some of the most appealing features of this program is that borrowers do not need to submit or pay for a new appraisal. The VA underwriters will use your previous appraisal (even if your property has significantly depreciated in value!). Additionally, no credit, income, or asset documentation is required. Lastly, another significant benefit is that the VA funding fee or IRRRL closings is typically only 0.5 percent of the loan value versus the standard 2.15% issued on most VA home loans.
One disqualifying factor is that you can not pay off a second mortgage with the IRRRL program. The refinance can only pay off a previous VA loan. Therefore, you may not use the IRRRL to refinance from a conventional or FHA loan. However, you may refinance from a conventional or FHA loan into a VA loan, but it would not be the streamlined IRRRL program, it would be a standard refinance.
VA Cash-Out Refinance
The VA cash out loan is the best option for veterans who wish to tap into equity in their home. How it works is you apply for a loan amount that is your current loan balance (payoff) plus the amount of equity you want to receive at closing. So if you own a $200,000 home and owe $100,000 and want to receive $50,000 cash back you would apply for a $150,000 loan amount. Then, at closing your current loan of $100,000 would be paid off and you would receive a check for $50,000 (keep in mind you will also have closing costs so in this case you would want to apply for a slightly higher loan amount to make sure you receive the full $50,000).
The VA cash out refinance program is also what is used for borrowers who need to switch from a non-VA mortgage to a VA home loan. Even though their may not be any cash received back at closing, it is still treated as a VA cash out refinance since the proceeds of the new loan will be used to pay off a non-VA mortgage lender.