Veterans the nation seem to have mixed opinions about the best times to refinance a home. For some, paying a higher monthly mortgage payment is ideal as it allows them to pay their homes off more quickly, but for others, a high monthly payment is a huge burden that is taking a toll on their everyday lives. When should you really consider refinancing your home, and when is it better to stick it out? Below are four scenarios in which refinancing is likely the best choice for veterans.
PMI, or private mortgage insurance, is a monthly fee tacked onto your mortgage payments. It’s designed as a protection for the lender in the event that you default on your mortgage and your home goes into foreclosure. With a traditional mortgage, PMI is a requirement for individuals who have credit scores below a certain level as well as for those who cannot pay the full 20% down payment often required by these mortgages. If you are a veteran and you are paying PMI in a traditional mortgage, you may want to consider refinancing into a VA home loan, instead.
Sometimes your circumstances might change significantly and lead to an inability to comfortably pay your monthly mortgage payment. Maybe you were laid off from a job or perhaps an emergency situation resulted in a decrease in your available pay. If you are having a hard time paying your mortgage every month, it may be worth your time to consider refinancing. This is especially true if you want to move from a 15-year to a 30-year term, which can drastically lower your payments.
Believe it or not, even a quarter of a percentage point in your interest rate can make a huge difference in the amount of money you pay over the course of your mortgage term. Take the time to reevaluate your current loan and the associated interest rate, then consider shopping around for a lower one. Often, you can “prequalify” for refinancing much the same as you prequalified for your original loan, and this can help you shop around to find the best interest rates possible. If you are a veteran, interest rates associated with VA home loans are intended to be affordable, even if you have less-than-stellar credit.
Last, but most certainly not least, you should also consider refinancing into a VA home loan if you expect to prepay your loan at some point in the future. This is ideal for anyone who may be expecting an inheritance or someone who may have won a substantial amount of money in the lotto, too. Believe it or not, traditional lenders will often penalize you for paying off your mortgage early in order to recoup some of the interest that you will not be paying due to the shorter term. With a VA home loan, there is no prepayment penalty, so paying your loan off early can save you tens of thousands of dollars.
Before diving right in and refinancing your home, it’s important to think about your current circumstances and what you expect to occur in the future. If any of the four statements above apply to you, then it may be a good idea to consider refinancing your current mortgage into a VA home loan, instead.