The U.S.Department of Veterans Affairs (VA) offers a guaranteed mortgage loan to eligible American veterans or their surviving spouses (if not remarried) to help them avail affordable housing finance in places where private financing is unavailable. The VA loan, as it is known, offers up to 103% financing, without the need to pay private mortgage insurance, to eligible candidates. Other advantages are zero-down-payment (subject to the sale price being lower than its appraised value), lowered interest rates and a standard subsidized VA funding fee. Veterans are also encouraged to use the VA loan to refinance an existing mortgage. Here are some available options for refinancing an existing mortgage with a VA home loan:
1. VA Streamline or Interest Rate Reduction Refinancing Loan (IRRRL)
This is strictly for VA to VA refinance. Veterans who have already used their VA loan eligibility to buy a home, but find it difficult to pay the interest on, can avail this facility and pay a lower rate of interest than what they were initially paying on their pre-existing VA Loan. The IRRRL or VA streamline, is a good option for existing VA loan holders to reduce their current loan rates, and pay lower monthly mortgage payments.
2. Cash out refinance
A cash-out refinance loan can replace the current mortgage held by a veteran. Under this scheme, an eligible VA loan holder can liquefy their home’s equity to cash, and use that money to pay off other loans, make any other payments or even renovate their home. It is not the same as home equity loans, for this is a replacement to the current mortgage, as opposed to adding another loan to the existing mortgage, in addition to having lowered interest rates.
3. Conventional to VA Home loan refinance
As the VA loan program has been designed specifically by the U.S. Department of Veteran Affairs to help veterans easily obtain home finance; most veterans are ideally eligible for the VA loan. They are in fact encouraged to refinance any non VA loans into an existing VA home loan, as it offers more benefits. All they need to pay is a subsidized funding fee (anywhere between 0.3 to 3.33% of the total loan amount) to be eligible for this conversion refinance.
