With interest rates at all time lows, many home owners today are found wondering if a refinance is something that would benefit them and/or if they are even eligible to refinance in today’s crazy housing and credit markets. Here at LowVARates.com we make it our goal to shed light into some of the most pressing concerns and topics of high importance among our nation’s military and VA home owners.
Why should a veteran refinance?
- There are numerous reasons for which someone might want to refinance but here is a list of the most common
- Lower your interest rate
- Lower your monthly payment
- Shorten your term or pay off home faster
- Pay off consumer debt
- Do home improvements
Veteran home owners need to understand that when trying to refinance a VA home loan, there are two primary questions that must be answered in order to first determine what kind of refinance makes the most sense. 1. Do you currently have a VA mortgage on your home? 2. Do you want to do home improvements, pay off debt, or take cash out of your equity? If you answered “yes” to #1 and #2 then you will be taking part in a VA cash-out loan. If you answered “no” to #1, and “no” to #2 you still will be doing a VA cash-out loan, even if you are not really taking out cash etc. If you answered “yes” to #1 and “no” to #2 then you are going to participate in the VA streamline refinance or the IRRRL.
What is a VA streamline or IRRRL?
This loan is the most popular loan among current VA home owners. The Interest Rate Reduction Refinance Loan (IRRRL) is a special government-endorsed refinance that eliminates all the red tape and difficulties that can normally arise with a normal refinance or a cash-out. In a nutshell, the theory from the VA and the mortgage lender is this; if you currently have a VA loan, then the Department of Veterans Affairs does not require you to re-qualify to simply lower your payment, rate or term. Now on the other hand, if you had been approved for a loan a few years back when you bought your home, and now you want to build an addition onto your home, then the VA would require you to get approved again, even if the interest rate is lower, because you are taking on additional debt, and the VA and the mortgage lender need to make sure you can afford that new responsibility. The VA streamline or IRRRL will normally carry out the following benefits to the VA home owner. Benefits of a VA streamline refinance are:
- Immediate payment reduction from the lower interest rate
- Ability to pay off your home years faster with no extra money
- You may be able to postpone or defer your next two mortgage payments
- Most veterans will get a cash refund of their current escrow account
Future posts will get into more of the details on this unique program for veterans.