Refinancing Into a VA Loan: Here Are the 3 Options

Scenario

My husband is a military veteran. Myself and my husband took a 30-year fixed rate VA mortgage loan 5 years ago. During the initial 3 and half years, we managed to pay mortgages with ease, without facing much difficulty. Due to some family contingencies, our financial condition deteriorated and we are now facing difficulty in making monthly payments. Is it now possible to refinance the existing loan into a new VA loan? What are the options behind us? Please explain.

-Alicia Presler-

Solution:

Dear Alicia, thanks a lot for your question.

Many of you who want to refinance into conventional loan, may struggle a lot. But, since your husband is a military veteran, you have the nice option of refinancing your existing VA loan into a new loan. Two important advantages of refinancing into a VA loan are:

1. Refinancing up to 100% of the value of the home is permitted by the Department of Veteran Affairs.

2. You are not required to pay any mortgage insurance for refinancing into a VA mortgage.

Mortgages are now moving around historic lows. Time is indeed ripe for refinancing. Since your husband is a military veteran, it would be foolish not to take advantage of refinancing into a new loan. Here are the options available before you.

1. Lowering down the rate of interest

Through VA home refinance, you can lower down the mortgage rate, which in turn reduces the monthly mortgage payment. This streamline refinance program is known as the Interest Rate Reduction Refinancing Loan (IRRRL). This program requires you to produce minimum documents. Credit checks are not also needed for refinancing under IRRRL. Some lenders however conduct credit checks on their own discretion.

2. Cash-out VA refinancing

Cash out refinancing opportunities are also offered by the Department of Veteran Affairs. If you have sufficient equity in your home, then you can opt for VA cash out refinancing. Equity is the difference between the current market price of the house and the amount of mortgages that you still owe. The cash out refinancing proceeds can be used for whatever purposes you want. Majority of the lenders will permit you to refinance even 100% of the value of the home. Again, some lenders are there who may not offer you the chance of VA cash out refinancing.

3. Refinancing a traditional

It may sometimes be the case that a borrower is a military veteran and has taken out a conventional mortgage loan. The mortgage payments that the borrower is paying may be too high for him. In such case, perhaps, the best option for him would be to opt refinance the traditional loan into a VA loan.

These are the 3 options for refinancing into a new loan. Since your husband is a veteran and you have already taken out a VA loan, the first two options will be applicable in your case. Depending upon your financial situation, equity and future goals, you have to select the option which suits you best.

Jessica Bennet with her vast experience in the mortgage industry has been associated with the MortgageFit Community as a Mentor. Not only does she participate in the community forums to give her suggestions, but also makes her contributions through different articles on mortgage.

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