Hey, are you looking for the methods to refinance a VA loan? Refinancing a loan means you get a new loan, and the lender closes your previous loan. Then, you are at the right place. Refinancing of loans has benefits which we will discuss later in this article. In some cases, there is a drawback to refinancing the loan.
Eligibility to get qualified for refinancing of VA loan. In this article, we discuss various methods that are required for refinancing VA loans. You have multiple questions in your mind regarding the VA loan that we will discuss in this article. After reading this article, you will learn the approaches to refinance your VA loan.
What is VA Home Loan?
VA home loan is a type of home loan given to the army veteran and two years of continuous service. There are lots of benefits of the VA home loan. The loan applicant will not be paid any down payment, PMI (Personal Mortgage Insurance), and any other charges unnecessarily taken by the private lenders. The rate of interest is also competitive, so every person wants to get a VA home loan. The government takes the guarantee of the loan, so there is no need for security of the person.
What is refinancing of the VA home loan?
Refinancing a VA home loan means you get the new VA home loan at the new interest rate and with a new loan repayment period. The new lender pays off your previous VA home loan. Refinancing of home loan saves your thousands of dollars when counting in the long term as the VA home loan is the long term loan. So if you refinance your home loan at a lower rate of interest, you save a lot of dollars at the end of the loan term.
What are the benefits of the refinancing of the VA home loan?
There are various types of benefits of refinancing the VA home loan, which is as follows:
When the rate of interest of a home loan goes down, it is the time of refinancing your home loan. The low rate of interest saves you a lot of money at the end of the loan term. So you have to periodically check the bank’s website for the low rate of interest. Then apply for the refinancing of the loan.
Reduce monthly payments
At the time of refinancing, you have the option to change your loan repayment term. If you are struggling with the repayment of the home loan, then you will reduce your monthly payment. It becomes easy for you to pay the lower repayments on the new VA home loan. But the point here is that your loan repayment term may be exceeded if there is no high difference in the latest and the old interest rate.
Increase monthly payments
While refinancing, you have the option to change the loan repayment period. You may also increase your monthly payments to reduce the loan term. If you increase your repayment amount with refinancing, it becomes a double benefit for you. This trick saves you thousands of dollars on the VA home loan in the long term. And you will pay off all your home loans in less time, and you will become financially free quickly.
Need extra Cash
You will get extra cash on your new loan. But the interest rate on this additional cash feature is more than the conventional refinancing of the loan. Because this loan feature is risky as compared to traditional refinancing.
Pay off the home loan sooner
As discussed in the upper point, increase your loan repayment amount or decrease your loan repaying term. You will pay off your VA home loan in less time. And after paying off the loan, the money which saves, you can do a lot with this money. You will invest this money in a retirement plan. Also, you will create an emergency fund with this money, and you will enjoy your life financially free.
How many times should one refinance a home loan?
As such, there is no limit. It depends on you and the requirement you have. Refinancing of home loan save your money at the time without any question, but you will do some math before refinancing. If there is little change in the interest rate, then there is no benefit of refinancing. But if you see a 1% to 2% change in the interest rate, it becomes beneficial for you in the long run. Some people may refinance their home loan three times a year. There is no type of limit on the refinancing of a home loan.
What are the types of refinancing of VA home loans?
Usually, there are two types of refinancing of VA home loans which are as follows:
- IRRRL: The complete form of IRRRL is Interest Rate Reduction Refinance Loan. It is also known as VA streamline. The loan applicant has to pay only the VA fees to get refinancing which is 0.5% of the total loan amount. IRRRL is the method by which you will get refinancing of your loan in significantly less time.
- VA cash-out refinancing: This is the method in which you will get some cash when you refinance your home loan. In this case, you have to pay 2.3% of VA fees on your total loan amount. In addition to that, the interest rate, in this case, is more as compared to the VA streamline refinancing method.
What is the eligibility to get a VA loan to refinance?
The eligibility to get a VA loan to refinance is as follows:
- Previous VA home loan: To get a VA home loan to refinance, you should already have a VA home loan. Also, you have not missed any of your repayment within the 12 months.
- Credit Score: You should have a valid credit score to get a VA loan to refinance. But at least a 650 credit score is required for you to get a VA home loan to refinance. Credit score requirements changed according to the market fluctuations.
- Debt to Income requirements: VA home loan department checks your debt to income requirements. As the debt to income requirement is 60: 40. It means that 60% of your total income is used for your daily expenses, and 40% of your total income should go to repayment of the loan.
The article concludes that there are two types of refinancing of VA home loans. You should consider the VA streamline method of refinancing because this method saves you a lot of money. We have mentioned the VA home loan refinancing eligibility, benefits, and requirements in this article. Hope you like the article.