One of the most common reasons people refinance their VA loans is to reduce their payments and pay down the balance more quickly. Yes. VA homeowners can refinance their loans to make use of reduced interest rates, stretch or shorten their loan term, or even pull cash from their home equity to repay the loan. To refinance a VA mortgage, veterans can either utilize one of the many VA refinancing options available to them (that we will talk about later in this article) or they can use a VA lender to refinance their mortgage. The choice is yours and the decision should be an informed one made after talking to a qualified VA loan specialist. Here are three reasons why you may want to refinance your VA mortgage:
First, when you refinance your VA home loan with a VA lender, you have complete freedom in choosing the options that best meet your financial goals. Instead of considering the VA’s home loan program, when you refinance your VA loans, you are free to determine how much you want to reduce your payments, stretch out the loan term, or pull equity from your home to pay down your mortgage. In short, you decide how to use the refinance rates that you are offered. And with the flexibility of home loans under the Home Affordable Modification Program (HAMP), you have a lot of freedom.
Second, when you refinance your VA home mortgage, you often get better VA REFINANCE RATES than what you could get from a VA cash-out loan. This is because most home loan rates are tied to fixed percentages of your home value. While it is true that you may be able to refinance your current home for more money, keep in mind that the interest rate you get may be lower if you choose to go with a VA cash-out loan. Moreover, if you plan to stay in your current home, you will not need to pay fees and closing costs for a VA mortgage as compared to a VA refinance.
Third, when you refinance your VA mortgage, you may get a better deal than what you would get from a conventional loan. For instance, when you finance a conventional loan through a bank, your monthly payments can go up to as much as twenty percent above the effective interest rate. And if you have high-interest debt, your monthly payments may also go up significantly. On the other hand, when you refinance your VA mortgage, your monthly payments can be less than two percent above the interest rate. Moreover, your interest debt may not increase at all. This allows you to save up on fees, lower your monthly payments, and pay off high-interest debt.
Fourth, and perhaps most importantly, when you refinance your VA mortgage, you can use it to leverage your home equity. A lot of lenders will require you to have a decent enough credit score to even qualify for their no-money-down refinance program. But if you use the home equity in addition to your conventional loans, you can get a better interest rate and other benefits. Most conventional lenders do not offer to refinance unless you have a high credit score, but a VA refinance can help you secure a lower interest rate. You may also be able to get additional benefits such as lower fees and costs, longer-term fixed repayment terms, and other perks.
Many active-duty and retired military personnel benefit from VA refinance loans. And it is not just veterans who should consider them. People who are eligible to apply for VA loans can include: members of the Selected Reserve, National Guard and Army, active and retired police officers, and retirees of the National Museum of American History, Coast Guard, Air Force, and Navy. In other words, anyone who is a veteran, active or retired, may be able to get a VA to refinance loans to consolidate their existing loans.