Refinance a VA Loan: Should You Do This?
Updated: Sep 25, 2020
There are several benefits of a cash-out refinance of your VA loan. One of the most significant reasons people seek to refinance a VA loan is to enjoy lower monthly payments. If you plan to refinance your VA loan for the same number of years, you will end up extending your repayment date, but you’ll end up with a lower monthly payment. This option is perfect for those who may need a more affordable and manageable monthly payment for their specific income situation.
Another reason a refinance option is worth considering closely is to achieve a more stable payment plan. When you refinance, you may be going from an adjusted or variable-interest-rate to a fixed-income rate that will be predictable throughout the duration of your loan. This option will also greatly benefit those who need more affordable payment options.
How to Refinance VA Loan
There are approximately 21 million veterans and service people in the United States, and of that number, more than 600,000 took advantage of VA loans (Veterans Administration) in 2018. It’s a valuable benefit for some of our most deserving citizens. With an additional rate cut recently, the opportunities for vets to benefit from refinancing and taking advantage of their home equity has increased.
There are a couple of specific options when it comes to the decision to refinance your mortgage – whether it’s an original VA loan, or not – a streamline program or IRRRL (Interest Rate Reduction Refinancing Loan), and a cash-out refinance loan.
As we discussed previously here, an IRRRL is usually used to reduce the borrower's interest rate and monthly payment when rates are lower than when the mortgage was originally financed. It’s also valuable when converting an adjustable rate mortgage (ARM) to a fixed rate loan.
It’s one of the simplest – ergo, streamline – refinancing processes available as it doesn’t require an appraisal or credit underwriting. It must be implemented on an existing VA mortgage but is minus the usual qualifying hoops to jump through. There are no cash back options on an IRRRL program. The biggest advantage is the ability to refi up to 100% of your home’s value and skip the requirement to purchase mortgage insurance.
Who is Eligible for IRRRL?
In order to apply for an IRRRL, you have to meet certain requirements.
To be eligible for an IRRRL, you must:
Already have a VA-backed home loan
Use the IRRRL to refinance the existing VA loan
Certify that you live in or used to live in the home that is currently covered by the existing VA loan
If you meet those requirements, you will be eligible to apply for an IRRRL.
The cash-out option is ideal for vets and service members with an existing VA or conventional loan who want to take advantage of the equity in their home to access cash. The qualifications for a cash-out refi are similar to an original mortgage with homeowners needing to comply with a home appraisal, credit report and certain LTV (loan-to-value ratio), but these vary by lenders.
There are no restrictions on the use of the cash-out difference on a refinance, and needs may vary from debt consolidation to student loans, to emergencies to other financial needs. It may also be utilized for home improvement and remodeling projects that would further increase the equity and value in the home.
EnTrust Funding is Here to Refinance VA Loans
EnTrust knows that every veteran and service member’s financial situation is different. We urge all VA loan holders to evaluate their own requirements and obtain up-to-the-minute rates and information from a reliable lender. We want the best for our vets and the brave people who fight for our country’s freedom. That is why EnTrust Funding (ETF) provides cashout refinance for our veterans and service members. We have the experience and knowledge needed to help you achieve the best refinancing to get the best monthly payment plan, no matter your income situation. We have a variety of programs that will suit anyone’s needs. Just give us a call today to learn if a VA refinance is the right step for you and your loved ones.