Whether you are struggling to make ends meet due to a high conventional mortgage payment or you simply want to take advantage of a much lower interest rate, refinancing into a VA loan may be the right course of action. In recent years, changes to the VA home loan program have made these mortgages incredibly lucrative, and if you haven’t considered refinancing into a VA loan, you may be missing out.
If you are currently making payments on a conventional (non-VA) mortgage, you may be paying more than is necessary each month and putting yourself under unnecessary strain. For example, if you took out your current mortgage without a 20% down payment, or if your credit score was lower than lenders typically like to see, you are probably paying for private mortgage insurance, or PMI.
PMI is, on average, 1.5% of the value of your loan tacked onto your monthly payments. This means that if you borrowed $200,000, you could be paying roughly $150 in PMI every single month on top of your mortgage payment. Over the course of a year, that’s $1800. If you choose to refinance into a VA loan, you will no longer be required to pay PMI, and that means you can put your $1800 back in your pocket.
If you already have a VA home loan but you are interested in reducing your monthly payment or shortening the length of your loan, you can take advantage of the interest rate reduction refinance loan, also known as the IRRRL. In fact, the VA does not even require lenders to check your credit, and you won’t have to have your home appraised to qualify. Just remember that since lenders have their own sets of rules and guidelines, they may require credit checks and appraisals even if the VA does not. The funding fee associated with this loan is a mere 0.5% added onto the loan balance. The only downside is that you cannot use an IRRRL to pay off a second mortgage.
Finally, if you have a VA home loan and you have some equity built up, you might also choose VA loan cash-out refinancing. Simply put, this means that you can refinance your mortgage into another VA loan and receive cash back from your equity, which can be used for any number of purposes, including debt repayment or consolidation. Not all lenders will allow cash-out refinancing, and some of those that do may have stringent requirements in place. On the other hand, you may be able to refinance 100% of the value of your home to pay off your old mortgage, as well.
If you are considering refinancing a conventional mortgage into a VA loan to save money or even avoid foreclosure, you should first be sure that you qualify for a VA loan by checking the requirements here. To learn more about your refinancing options, or to discover the best refinancing method for your unique financial situation, contact us today. We are proud to serve active service members and veterans alike to help them achieve their financial goals.