Refinancing is a smart decision if it can decrease your interest even by two percent, says Investopedia. In case interest rates are declining, refinancing is a wise decision. This would save thousands of dollars annually on mortgage costs. Through refinancing, you can also shorten your loan’s length, which will boost equity. According to CNBC, applications for refinancing a home loan witnessed a surge of 105 percent in 2019. This happened because the interest rates are dwindling. Veterans have the advantage of availing more refinancing options, thanks to the U.S. Department of Veteran Affairs. Veterans can use VA Streamline (IRRRL) Refinance or Cash-Out Refinance through the VA Home Loan program for refinancing their mortgage.
VA Streamline (IRRRL) Refinance is for those who already have VA loans and want to benefit from savings & lower interest rates. This process involves an ample amount of paperwork & nominal cost. Through IRRRL, you can refinance your mortgage to 15 years from 30 years and reduce cumulative interest costs. However, the new interest rate should be at least one percent less than the former one. Moreover, the borrowers are empowered to do this process without an appraisal.
To check you are eligible for a VA Refinance or not, check below whether you meet these requirements.
- You should have served over 90 consecutive days or over 181 days on active duty during wartime or peacetime, respectively.
- In case you belong to the category of National Guard Members & Reservists, your service should meet six years of service requirement.
- If you are a surviving spouse of a veteran who died while doing his service
- You are an existing VA Loan holder.
On the flip side, those who have conventional loans can go for Cash-Out Refinance. A mortgage refinancing option, through cash-out, refinance, can replace your old mortgage with a new one that comes with more amount than the existing one, thereby helping you use your home mortgage to avail more cash.