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While the reasons to refinance a VA home mortgage may be numerous, there are two distinct ways to refinance a home loan and take advantage of the benefits.

1. Interest Rate Reduction Refinancing (Streamline Refinance)

One of the most common ways of refinancing a VA home mortgage loan is through a streamline refinance loan or as it is commonly called, IRRRL (Interest Rate Reduction Refinancing Loan.) This type of loan offers a quick and efficient timeline to the refinancing process.

This style of refinancing gives homeowners a low and fixed interest rate and those who use this refinance can also lower the number of years on their mortgage, reduce monthly payments and take advantage of other benefits in selecting this loan.

The main reason to use a streamlined loan in the refinancing process is that where most refinancing can take a few months to accomplish, an IRRRL loan can take as little as four weeks. This is done because the minimal amount of paperwork is required because veteran homeowners have already turned in the paperwork required during the home buying process.

2. Cash-Out Refinance

The second way to refinance a VA home mortgage is through a Cash-Out Refinance or it is sometimes called Home Equity Refinancing. This style of refinancing loan offers veteran homeowners the ability to receive cash through a mortgage refinance. Many homeowners take advantage of this loan options to pay large bills that would typically require a loan such as the purchase of a new car or college tuition. Instead of taking out a secondary loan with potentially higher interest rates, homeowners can refinance using the cash-out option and receive cash for the payments already made towards the house. For example, if a home mortgage was taken out for $350,000 and the homeowner had paid off $10,000 of that amount, homeowners could refinance with the cash-out option and receive cash in the amount of $10,000 and refinance the home loan back to the original amount whilst taking advantage of possibly lower and locked interest rates.

When to Refinance

As suggested above, there may be several reasons why a veteran homeowner might wish to refinance; however, the right time to refinance should be when a homeowner has enough money to justify the expense that can at times be associated with refinancing. Another good time to refinance may be when interest rates are particularly low. To refinance, veteran homeowners must be up-to-date on mortgage payments and have only one 30-day late payment within the previous year.

Where to Start

To begin the refinancing process, veteran homeowners must get a new certificate of eligibility (COE,) fill out a loan application from their lender and meet the standards which may be required by their lender (in most cases a credit and income verification.) The homeowner can then discuss the mortgage refinancing options that will fit their personal needs best and make the decision to roll funding fees and closing costs into the loan refinance or to pay it up front.

Refinancing a VA Mortgage

While the reasons to participate in VA refinancing may be numerous, through one of the two distinct ways of refinancing, a homeowner can get the best VA home loan refinancing option for them. Cash-out refinancing loans provide cash back to pay for other items and an IRRRL or streamlined refinancing loan offers veteran homeowners lower interest rates and refinancing in a streamlined, quick and highly efficient manner. We hope to have answered your questions on how to refinance a VA mortgage. If you have comments, questions or even concerns, we would be happy to connect you with one of our loan officers to discuss these with you.

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