Depending on the their eligibility, veterans may be eligible to refinance up to 100 percent of their home’s worth. The advantages of refinancing with a VA Loan include no down payment (if your home’s sales price is less than its appraised value) and no private mortgage insurance. Combined with the benefit of low interest rates, VA loans are ideal for veterans looking to refinance an existing mortgage. Here are a couple of VA refinancing options available to qualified borrowers.

Interest Rate Reduction Refinancing Loan (IRRRL) or VA Streamline

The IRRRL, also known as “streamline” refinance, is an excellent option for VA loan holders to lower their existing VA home loan rates, and realize significant savings by paying reduced monthly mortgage payment. It is a VA-guaranteed loan through which existing VA home loan borrowers are able to pay a lower rate of interest than what they were paying earlier on their VA loan. This loan is only available to refinance a property on which veterans have already used their VA loan eligibility. It means it must be a VA to VA refinance.

IRRRL is a streamlined process that requires minimum documentation, and no appraisal; a few exceptions apart. Moreover, borrowers have to pay a lower funding fee that is typically no more than 0.5 percent of the total loan amount and can be added to the loan balance, in comparison to other loan options. Though you cannot use an IRRRL to settle a second mortgage, it can be utilized to refinance 100 percent of your home’s value.

Quick Facts About IRRRL Loans:

• When applying for IRRL, no credit underwriting package or appraisal is required.
• The Interest rate may increase when you choose to refinance an adjustable rate mortgage (ARM) and make it a fixed rate mortgage.
• The VA loan borrowers don’t receive any cash-out during a streamline refinance.
• At the time of refinancing, the mortgage for the last 12 months must be paid and updated as per VA records.

Cash-Out Refinance

Another option to refinance your existing VA loan is Cash-Out Refinancing. Under this refinance option, the eligible VA loan holder can extract cash from their home’s equity to address concerns such as making home improvements, funding school fees, or paying off debt. People, often confuse it with home equity loans that are entirely different.

A cash-out refinance loan is a replacement of your current mortgage, whereas a home equity loan is about adding another loan to your existing mortgage. Usually, the interest rates on cash-out refinance loans are less than the home equity loans.

Conventional to VA Home Loan Refinance

VA loans have been designed by the United States Department of Veterans Affairs to help veterans in obtaining financing for their home. By this definition, most veterans are eligible for a VA loan. When refinancing a non-VA loan into a VA-home loan, however, veterans are automatically considered by VA to have begun full VA financing. It means they need to pay a funding fee and be eligible for the program. Qualified Active duty members and Veterans pay a funding fee of 2.15 percent of their total loan amount for their first usage and it can be added to their loan balance.

VA Eligibility

Generally speaking, the basic eligibility criteria for a new VA loan or a VA refinance are:

• You are a veteran who has actively served for 90 consecutive days at the time of war.
• You are a veteran who actively served for 181 days during peacetime.
• You are a veteran whose service tenure with National Guards or Reserve is more than six years.
• You are a service member’s spouse and your spouse died in the line of duty or as a result of a service-related disability.

Conclusion

Due to these benefits and options, veterans can refinance existing mortgages into VA loans for considerable cost savings. Lenders like us who provide these loans are trained in the terms prescribed by the United States Department of Veterans Affairs. Contact us today to discuss your VA loan refinance options.