VA Cash Out Refinance
Veterans and active duty service members have an excellent option in VA cash out refinancing. It allows you to access the equity in your home to pay off debt, invest in real estate, or improve lifestyle.
A VA refinance loan can save you tens of thousands in interest costs. But, to get the best rate available, you need to shop around.
Interest Rate Reduction Refinance Loan (IRRRL)
If you have a VA loan and are thinking about refinancing, an IRRRL (also known as a streamline loan) might be the perfect solution. These loans offer fast and effortless ways to reduce your interest rate and monthly mortgage payment.
IRRRLs don’t require an appraisal or credit check, making them easier to qualify for than many other refinance options. Furthermore, they’re quicker to underwrite which can allow you to get a better rate and save money in the long run.
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With IRRRL, you can lower your monthly payments, extend the length of your loan or even switch mortgage types. Furthermore, closing costs can be rolled into a new loan so that they won’t need to be paid upfront.
Typically, you can use an IRRRL to refinance an existing VA home loan or adjustable-rate mortgage (ARM) into a fixed rate loan. Unfortunately, it does not permit cash out of your property – which could be a disadvantage.
According to Ellie Mae’s June 2021 ICE Report, the average rate for VA Streamline Refinances was 2.92% – that’s more than a quarter of a percentage point lower than the 30-year conventional loan rate.
The VA has certain criteria for eligibility in order to be eligible. You must have lived in your home for at least two years and have an active mortgage that is currently in place; additionally, the new loan must be the first lien on your property.
When looking for a VA IRRRL loan, be sure to shop around among lenders. Most private banks and credit unions offer this loan option, allowing you to compare quotes from multiple providers side by side and find the best deal that meets your needs.
Once you’ve identified a lender offering the VA IRRRL, apply for the loan by filling out a Loan Estimate form with all of your financial info. Be sure to compare rates, terms and fees that each lender is offering before selecting one with the most advantageous overall offer for your individual situation and goals.
Cash-Out Refinance
If you have a VA mortgage and plenty of home equity, then you may qualify for refinancing into a cash-out loan. With this type of VA loan, you can access some or all of your house’s value to fund home improvements, pay off high-interest debts, and more.
When looking to purchase or sell a home, make energy-saving improvements or take advantage of other VA mortgage benefits, it is essential to shop around for the best rate. Doing this can help you save money over the course of your loan.
Veterans have several loan options to choose from, each with its own requirements and restrictions. In addition to a VA purchase loan, there’s also an interest rate reduction refinance loan (IRRRL) and cash-out refinance loan available.
Cash-out refinancing allows you to increase the amount of your mortgage based on both the appraised value of your home, plus any available equity you may have. At closing, you can take out that difference in cash as a lump sum payment.
You could use the cash to pay off your old mortgage, which will reduce monthly payments. If you’re in the market to purchase a home, cash-out refinancing is an ideal way to access your property’s equity and finance it.
Veterans Affairs allows homeowners to finance up to 100% of the appraised value of their homes with refinancing. Unfortunately, not all lenders adhere to VA regulations strictly, so it’s essential that you find one that does.
Cash-out refinancing also comes with a funding fee that may range from 0.5% to as much as 2.15% of the total loan amount. This fee must be paid at closing and serves to cover processing expenses associated with getting your loan approved.
Another VA refinance option, the Streamline Refinance, is faster and simpler to qualify for than a cash-out refinance and could reduce your monthly payments by up to 30%. You also avoid any funding fee with this option by rolling it into your loan or paying it out of pocket.
Fixed-Rate Refinance
If you are a qualified veteran with equity built up in your home, refinancing your VA mortgage could be the ideal way to lock in low interest rates. Refinancing involves changing from a higher interest rate to a lower one, which could save thousands of dollars over the life of the loan.
Your interest rate can vary based on several factors, including your credit score, down payment amount and current mortgage term. Generally speaking, VA loans offer lower interest rates than conventional ones since the government wants to assist military veterans and their families in gaining ownership rights.
Fixed-rate VA refinance loans provide the security of knowing your interest rate for the life of the loan, which can be advantageous when planning and budgeting long term. However, switching from a fixed rate mortgage to an adjustable-rate one could prove more costly in the long run.
Another advantage of a VA cash-out refinance is that you can borrow against the equity in your home, which could be used for paying off high-interest debt like credit cards or car loans. Furthermore, this loan could enable energy-efficient improvements that will increase the value of your house.
For instance, you could upgrade your existing HVAC system with a high-efficiency model or purchase new appliances. Both of these changes would add value to your home and help save you money on heating and cooling expenses in the long run.
With a VA fixed-rate mortgage, you can qualify with as little as 5% down payment if certain criteria are met. Plus, with good credit and proof that your payments are being made on time, the interest may even be reduced!
A VA streamline refinance is a more straightforward option that enables homeowners to modify their current VA mortgage without paying for either an appraisal or equity loan. These loans often offer lower interest rates than traditional cash-out refinances, plus a funding fee significantly lower than the typical 2.15% to 3.3% fee associated with cash-out refinancing.
Jumbo Refinance
A VA refinance allows you to tap into the equity in your home to access cash. It also offers you a lower interest rate and decreases your monthly mortgage payment, making this option particularly advantageous if you need to consolidate debt or pay for large purchases.
The top VA refinance lenders provide a wide variety of financing options, from conventional to jumbo. Furthermore, they provide zero down payments and flexible payment plans so it’s easier for military members and their families to secure financing.
In addition to offering competitive rates, many VA lenders also provide other services like insurance, banking and investment options. USAA for instance provides VA primary, refinance, jumbo and cash-out loans to its military customers.
As with any loan, the cost of a VA refinance depends on your individual situation and credit score. Your lender will assess your income, debts and other financial details to determine which mortgage rate works best for you.
Though most VA mortgages require a minimum credit score of 580, some lenders will accept applicants with as low as 620 credit scores. You may even qualify for a higher rate with a VA mortgage loan if you have enough down payment or are willing to make payments over an extended period of time.
VA loans also provide a guarantee for part of your loan amount, so you won’t need to pay private mortgage insurance (PMI). PMI can be expensive and consume a considerable amount of money over the life of the loan.
Another advantage of a VA cash-out refinance is that it provides assistance to veterans who were hard hit by the housing slump. Homeowners with this cash can use it for paying off high-interest short-term loans or credit cards, dealing with medical bills and emergencies, starting a business, or investing in a new home.
Cash-out refinancing your home equity for a new mortgage is easier and faster than an IRRRL, though you still must meet similar lending criteria and go through the same application process as with a standard mortgage.
VA cash-out refinances can take up to 55 days to close, which is longer than traditional refinancing but worth the wait for a better rate and access to your home’s equity. In some cases, you may even qualify for up to 100% financing of the value of your house!
