What Can You Do With the Existing VA Refinance Rates?
If you currently have a VA mortgage and would like to lock in a lower interest rate, refinance into a longer loan term or take out some of your home’s equity, there are several viable options available to choose from.
Begin by getting several no-obligation rate quotes from multiple lenders to see how much you could save. It’s an easy process that could pay off in the long run with your new loan.
Refinance to a Fixed Rate
Refinancing to a fixed rate mortgage can be an excellent way to save money on monthly payments, particularly if your credit score has improved or you have access to low interest rates due to current market conditions.
Many homeowners opt for a fixed rate mortgage instead of an adjustable-rate mortgage (ARM), as this type of loan has a set rate and won’t change over its life. You’ll also have peace of mind knowing your payment will remain the same, which can be especially important if you have young children or plan to relocate in the near future.
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Another advantage of choosing a fixed-rate loan is that it helps you build equity in your home. While a 30-year fixed-rate mortgage is the most popular option, you could also refinance to either 15 or 20 year loans and pay off your house faster while making equity building easier.
When refinancing to a fixed rate loan, you will be required to pay an upfront mortgage insurance (MI) premium. This is usually a percentage of your original loan amount and is rolled into the new mortgage; although not necessary, it could lower your overall monthly payment and overall interest paid over the life of the loan.
If you plan to remain in your house long term, opt for a longer mortgage term. Doing this allows you to build more equity in your property which could result in lower monthly mortgage payments over its life and possibly reduced total interest costs when refinancing.
However, a long-term loan will require you to pay private mortgage insurance (PMI), which can be costly. Unless your home has 20% equity or can get PMI cancelled, it’s essential to weigh these costs against any savings gained through refinancing.
Calculating the break-even points for your situation, which are the points at which refinancing will start paying off any savings you have compared to your current monthly payment, can be tricky. Bankrate’s mortgage refinance calculator can assist in this determination.
Refinance to a Cash-Out Refinance
Cash-out refinancing allows you to access your home equity for a lump sum payment, similar to a home equity line of credit (HELOC). The additional benefit of this type of loan is that you can borrow up to 80% of the value of your house through this arrangement.
Cash-out refinance loans provide flexible financing, allowing homeowners to use it however they please – from paying off high interest debt to making major home improvements and funding education expenses for their children. You may also use this money for savings purposes or consolidate debt.
Before you dive in with both feet, it’s essential to understand the risks associated with this type of loan and how it differs from a HELOC. Most significantly, there is an increased chance that you could lose your home if payments on your loan are missed. Furthermore, you could end up paying more than necessary on your debt.
Another potential risk is that a cash-out refinance may encourage poor spending habits. If you’re using it to pay off high-interest debt such as credit card balances, it’s essential to have an effective plan in place to manage your expenditures.
Finally, cash-out refinances typically come with higher interest rates than your existing mortgage. If you don’t have the funds saved to cover this extra cost, a fixed-rate refinance may be more suitable.
A home equity line of credit (HELOC) is similar to a cash-out refinance in that you can take out more money than what you originally owe, but the interest rate on the loan may change according to certain indexes such as the U.S. prime rate. You have the option to pay back the entire amount or in installments over its life; repayment can be made either in full or over several years according to current interest rates.
To be eligible for a cash-out refinance loan, you must have an FICO score of at least 620. This minimum credit score is required by most conventional loans; however, some lenders may set lower requirements. Furthermore, you must possess enough home equity to satisfy the lender’s underwriting criteria.
Refinance to a Variable Rate
If your current VA mortgage rates aren’t as competitive as you’d like, you might want to look into refinancing to a variable rate. Not only will this save you money in the long run, but it also gives you more freedom and flexibility with payments.
Variable interest rate loans can help you pay off your debt faster. If you’re looking to reduce your monthly payment or are thinking about home renovations, switching to a variable interest rate could provide some relief.
However, variable interest rates are much harder to forecast than fixed ones. They depend on several factors like the economy and monetary policy decisions made by the Federal Reserve, so prices may go up or down over time.
Variable rate mortgages can result in higher monthly payments if interest rates rise. If you’re uncertain if it’s worth the additional expense, consider switching to a fixed rate mortgage instead.
When making a mortgage decision, take into account how long you plan to live in your home. If you anticipate moving soon, switching to a variable rate might not be the best choice for you.
Bankrate offers VA refinance rates online, or you can call a lender and request one. A loan officer will also walk you through the process and explain any fees that apply.
If you’re thinking about obtaining a VA refinance, it is essential to shop around and get preapproved with different lenders. Obtaining at least three quotes will enable you to compare lenders and decide which one best meets your needs.
When shopping for a mortgage, make sure you get a quote that includes all closing costs such as title and appraisal fees. Some lenders don’t include these in their rates, so you may need to pay them separately upfront.
A cash-out refinance is a type of VA mortgage that allows you to access the equity in your home and take out some or all of the difference between what owes on your current loan and what remains. It could be an ideal solution for homeowners who have significant equity in their properties and wish to use it for major improvements or debt consolidation.
Refinance to a New Term
VA borrowers often discover that refinancing their mortgages into a lower interest rate can help them save money. But before considering taking out a VA loan refinance, be sure to assess your individual circumstances.
If you’re looking to reduce your monthly payment, a VA streamline refinance (also known as an IRRRL) might be the ideal solution. This type of loan is much simpler to qualify for than cash-out refinancing and doesn’t require you to go through an appraisal process.
You could also look into refinancing your home into a shorter-term loan, such as a 30-year fixed mortgage. This could be advantageous for borrowers who want to avoid paying an increased interest rate in the long run or those planning on selling their houses within a few years.
Refinancing into a shorter loan term can also help you pay off your mortgage faster, which reduces monthly debt payments. It’s wise to compare various refinance options before making any decisions.
Calculating your break-even point is the best way to estimate how much you’ll save. This number indicates how long it will take for you to recoup the money spent on closing costs, giving you a rough indication of whether refinancing is a wise investment or not.
The average VA borrower can expect to save enough over their loan term to make refinancing worthwhile. This is because VA loans are guaranteed by the government, so private lenders often offer more competitive terms to VA borrowers.
However, it’s essential to shop around for the best VA refinance rates and fees as some lenders provide more competitive terms than others. That is why it’s wise to compare at least three VA loan quotes from lenders.
In addition to the interest rate, you must consider the funding fee and any other costs associated with refinancing a VA loan. These fees may range from 2.15% – 3.3% on cash-out refinances or 0.5% for IRRRLs, all due at closing.
