VA mortgage refinance programs.
The VA gives veterans the opportunity to refinance their existing VA mortgage loan and secure a lower interest rate, lower payments, or both. In most cases, this can be done without having to go through the appraisal and credit evaluations.
Like a starter VA mortgage, the refinanced VA mortgage carries a fixed funding fee and a VA guaranty (Which have been recently reduced). The maximum loan term is still 30 years, and the new loan must replace the old loan as the first lien on the property. If your monthly payment will increase by 20 percent or more, or if you have recently declared bankruptcy, be prepared for the lender to evaluate whether you can still afford the payment before they approve the refinancing terms.
Refinancing a mortgage through the VA also means that the veteran can include up to $6,000 of energy-efficiency home improvement expenses in the new amount to be financed. All costs must be documented, and the project(s) must be completed within the 90 days prior to refinancing in order for the expenses to be reimbursed through the new loan.
What Are My VA Refinance Options?
To refinance your current mortgage, there are three main loan options available. The first two are only meant to refinance existing VA loans without giving cash back to the borrower, but the third option may include refinancing other liens on the property and a cash-back option.
1) Interest Rate Reduction Refinancing Loan (IRRRL)
An IRRRL is the best way to refinance your existing VA loan if you’re current on your payments and you just need a lower interest rate and a lower payment. You and your lender can discuss whether your new loan will be a fixed-rate, hybrid-rate, or adjustable-rate mortgage. The maximum loan amount will be the balance of the existing VA loan plus allowable fees, points, charges, and home improvement costs.
You might end up with a slightly higher interest rate or payment if you are refinancing an adjustable-rate mortgage (ARM). Your new payment might also be higher if you’re including the costs of energy-efficiency improvements in your new loan or you want a shorter term.
2) IRRRL for Refinancing a Delinquent Loan
Veterans can refinance with an IRRRL if their current VA loan is past due, but this IRRRL has slightly different requirements. The borrower must be able to prove to the VA’s satisfaction that their financial trouble no longer prevents them from making their mortgage payments as agreed.
Before making the new loan, lenders must submit this type of refinancing to the VA for approval because it involves rolling over any late payments, late fees, and collection fees (if any) into the new loan. Qualifying veterans must understand the impact this additional financing could have on their new mortgage payment.
3) Cash-Out Refinancing Loan
If you are a veteran who has a first mortgage from another source or would like to refinance all the liens on your property, you can still refinance with the VA. Unlike the IRRRL, these loans may be used to refinance any type of lien or combination of liens: tax liens, judgment liens, or any type of mortgage (current or delinquent). In addition, there is no requirement that the payment amount and the interest rate be lowered.
With this type of loan, an appraisal must be conducted before the refinancing is approved. Lenders may approve cash back to the borrower at closing for anything they think is a reasonable expense. The maximum loan amount for the Cash-Out Refinancing Loan is now up to 100 percent of the home value plus the funding fee and any energy rehab expenses.
Need More Information?
Other refinancing options may also be available for construction loans, installment land sale contracts, or other high-interest rate loans. These options have a different guaranty and maximum loan amount.
For more information on any of these refinancing options fill out the form at the top of the page to be contacted by a VA Lender.