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Refinancing a VA Loan: Four Examples of When to Try

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Could You Save Money by Refinancing?

Refinancing may not cross your mind on a daily basis. If you are content with your mortgage as-is, it might seem like more trouble than it’s worth. However, if you currently have a VA Loan and are current on your mortgage payments, you’re already eligible for an Interest Rate Reduction Refinancing Loan. The IRRRL is often referred to as a Streamline Refinance Loan. Why? The process is streamlined, can be done with no out-of-pocket expense, and could give your monthly budget some much needed relief!

Four Instances when you should Consider Refinancing:

(1) You want to free up some much needed money with an IRRRL.

First, you get to miss your next two mortgage payments & receive an escrow refund of one to three thousand dollars! How? For the new loan we will collect a new escrow using updated tax and insurance information. Bonus: Refinancing can also help with escrow accounts that are short due to increasing property taxes!

(2) Available interest rates are lower than when you got your loan.

Like almost everything related to the economy, “standard” interest rates on loans fluctuate over the years. On paper, an interest rate of 4.0% might seem close to 3.25%. However, when we apply these rates to a 30-year mortgage, it means saving tens of thousands of dollars! For this reason it’s wise to check up on the mortgage market every so often. Know what is available.  Refinancing could help you pay less monthly and over time!

(3) You want to reduce your mortgage term to a 20 or 15 year fixed rate.                        

Now, it’s becoming more and more common for homeowners to move before their mortgage is paid off. Many homeowners are refinancing their existing loans with a 20 or 15 year fixed term. Their payments remain close to what they are currently paying. This occurs because we significantly lower their interest rates. This accelerates the principle payments, creating much more equity in the property.

(4) You have an adjustable rate mortgage (ARM) but want a fixed-rate mortgage.

Finally, there’s a very good chance that an ARM could lead to higher monthly payments. Because they’re subject to change, they’re harder to budget for. The amount you pay this year may be quite different from what you paid before. Also, it’s common for ARMs to offer a period of fixed rates (3-5 years) where the promised rate is lower than the current standard for fixed-rate mortgages (FRMs).  However, once the “honeymoon” is over, folks with ARMs often pay higher rates than they would with an FRM!

“Is it time to refinance my VA loan?”

Ultimately it could be time to refinance if: your mortgage payments are current; available rates are lower than your current rate; and you’re projected to make a good savings. If you want to know for certain if refinancing is in your best interest, consult with a financial advisor who specializes in VA loans. How much will you save? A professional will help you decide if you should keep what you have…or negotiate for something better!

 

Photo courtesy of TaxCredits.net, via Flickr