Can you refinance a VA home loan?
Refinancing your VA Home Loan
If you have a VA loan, can you refinance it? The answer is a resounding yes. There are several reasons why a borrower might want to refinance their VA loan, including trying to get a lower interest rate, increasing or decreasing the term of their mortgage, and tapping the equity in their home in order to get some cash. And to accomplish those goals, there are a few different refinancing methods such as:
One of the most popular methods to refinance a VA loan is called VA Streamline refinancing, also known as an IRRRL (interest rate reduction refinance loan). The main benefit of this program is getting an interest rate reduction, which can free up monthly cash flow (making it a little easier to pay life’s expenses.) This kind of refinancing also as other benefits, such as allowing borrowers to roll all costs and fees into the loan, reducing or eliminating the need to have cash on hand for closing. There’s also no home appraisal required, so you won’t have to worry about paying for it.
To qualify for a VA Streamline refinance, the borrower needs to be approved for a new VA loan at a lower interest rate than their current one, unless they’re taking an adjustable rate mortgage (ARM) and attempting to refinance it into a fixed rate home loan. Another slightly less popular (but really smart) method that can save borrowers money is to shorten the term of your loan. While it might lead to higher payments in the short term, shortening (for example) a 30-year fixed-rate mortgage to a 15 year fixed -rate mortgage could save tens of thousands of dollars (or more!) in the long run.
If the goal of refinancing isn’t just to free up a little money, but to seriously tap into your home’s equity, you might want to consider a VA Cash-Out Refinance. In fact, if you’re a VA-eligible borrower, you don’t even need to have a VA home loan in order to take advantage of this program. For example, if you were a VA-eligible borrower with an FHA loan, you could potentially use a VA Cash-Out refinance to take advantage of the VA’s particularly low-interest rates.
Unlike traditional home equity loans or HELOCs, the VA permits a loan-to-value ratio (LTV) of 100%, meaning you can take all the equity out of your home at once. This can give you a lot more flexibility if you need to pay for major expenses, but it’s usually a good idea to keep some equity in your home, so you might not want to take advantage of the full amount. Typically, you’ll only want to get a VA Cash-Out refinance if you’re planning on staying in the home for the next few years, and interest rates are relatively low (so you save.)