Mortgage

Is the VA Streamline Refinance (VA IRRRL) value it?

Via the VA Streamline refinancing

Has mortgage rates gone down since you got your VA loan? The good news is that once you qualify for a VA Streamline refinance, you may find yourself able to refinance with less hassle.

This loan has minimal paperwork, lower closing costs, and an easier approval process. This gives many VA homeowners an easier time to refinance at a lower interest rate and cheaper monthly payment.

Find out if you are eligible for a VA Streamline Refinance and how to decide if this program is right for you.

Check your eligibility for the VA Streamline refinance. Start here (08/10/2021)

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Benefits of VA Streamline refinancing

Streamline refinancing, also known as VA Interest Rate Reduction Refinance Loan or "VA IRRRL", makes it easy to refinance at a lower interest rate and a cheaper monthly mortgage payment.

This can help homeowners save thousands over the life of their VA home loan. And it takes less time and effort than a traditional, non-VA refinancing loan.

Stephen Thaggard, Production Sales Manager for Embrace Home Loans, explains that a VA Streamline refinance is a hassle-free method that current VA borrowers can use to:

Lower the mortgage interest rate and the monthly payment. Shorten the loan period (e.g. from 30 years to 15 years) Or replace an existing VA variable rate mortgage loan with a VA fixed rate loan

"Qualified borrowers can enjoy the streamlined approach associated with a VA IRRRL that has no valuation requirement, no income or banking documents, and little to no out-of-pocket expenses, especially if they choose to include their closing costs in the loans," he says .

It is called “Streamline Refinance” because the approval and documentation process is simplified and accelerated. That makes it a popular option for current and former service members and their surviving spouses who apply.

Remember, however, that a VA IRRRL is not the only way to refinance a VA loan. Alternatives are a VA cash-out refinancing, a refi to an FHA loan, or a conventional rate-and-term or cash-out refi.

Check your eligibility for the VA Streamline refinance. Start here (08/10/2021)

When is a VA Streamline refinancing worthwhile?

To determine whether a VA IRRL is a good option, you need to figure out how much you can cut your interest rate and how long it will take to amortize your closing costs.

As with any refinancing loan, the closing costs are typically 2-5% of your loan amount. And there is the VA financing fee to consider, which is 0.5% of the loan amount for a VA Streamline refi – although your mortgage lender may allow you to pass all of these costs over to your loan balance.

Calculation of the "break-even point"

“The best way to calculate your payback period is to take the closing cost of the loan and divide that amount by the amount you save on monthly mortgage payments. A trusted mortgage professional can help you figure this out, ”suggests Mary Ann Fagley, Senior Loan Officer and Certified Military House Specialist at Mortgage Network.

For example:

For example, let's say your VA IRRRL close cost is $ 6,000 and you save $ 200 per month by refinancing. It would take 30 months (or 2.5 years) to break even and see "real" savings

Remember, in order to qualify for the VA Streamline Refinance, you must be able to get your borrowing costs and fees back within 36 months of completing your refinancing loan.

"If you can do this within that time frame, a streamline refi is likely a good choice," adds Fagley.

“However, you should also consider how long you want to stay in the property. If it doesn't take that long to amortize your costs, then you need to consider property values ​​and appreciation rates in your area, ”she explains.

Other reasons for using the VA Streamline

Another good candidate for the VA Streamline Refi is a current VA borrower on an adjustable rate mortgage looking to roll back on a fixed rate mortgage.

"This provides a streamlined approach with a stable fixed rate option to replace the uncertainty of future rate adjustments and payments, which can be stressful for some seasoned homeowners," says Thaggard.

You can continue to benefit if, in addition to lowering the interest rate, you also want to shorten the term of your loan.

Let's say you have had a 30 year VA loan for five years. When you refinance to a 15 year VA loan, you shorten your overall repayment schedule by 10 years and save likely tens of thousands in interest over the life of your new loan.

When is a VA Streamline refinancing not worthwhile?

VA Streamline refinancing is often not worthwhile if:

The break-even point of your refinance is more than three yearsYou plan to sell your home within the next three to four years, or if you think you will be transferred within 36 months and not keep the home

"Or, if your existing VA loan is about to pay off, such as when you have 10 or fewer years left, it's probably not worth touching it and restarting the clock," advises Julie Aragon, CEO / Founder of Aragon Lending team.

Also, keep in mind that your future monthly payments may not be as low as you hoped if you want to incorporate the closing costs and financing fee into your new loan. And you will pay more interest over the life of the loan than if you had prepaid the closing costs. This can negate some of the benefits of refinancing.

Alternative refinancing options

VA Streamline refinancing may not be worthwhile if you are paying more in closing costs than you are saving. And it won't help you cash out your home equity.

If you want to refinance with cashback – for home improvement, for example – you will need to use VA payout refinancing or another payout loan program.

"Refinancing to a traditional mortgage loan would be a great alternative to a VA Streamline refi if you don't qualify or the disadvantages outweigh the benefits," recommends Daniel Litvin, mortgage broker at Advantage Lending Corp.

"This is especially true for someone who is not exempt from the VA financing fee and has a loan-to-value ratio of 80% or less that would not require private mortgage insurance with traditional refinancing."

Finally, if your home is almost paid off, you probably won't want to use the VA Streamline Refi because the refinance will start over on your mortgage.

Taking out a new mortgage is a big financial decision. So, be sure to explore all of your refinancing options with a loan officer or financial advisor before proceeding. The benefits can be enormous, but you need to make sure that a refi really is the best decision for you.

Eligibility for VA Streamline refinancing

To qualify for VA Streamline Refinance, homeowners must meet several criteria set out by the Department of Veterans Affairs.

For starters, you must be VA eligible, which means you are an active duty member, veteran, member of the Reserve or National Guard, or an eligible surviving spouse. And your existing mortgage must be a VA loan.

You don't need to request a Certificate of Eligibility (COE) as a lender has already verified your VA eligibility when you received your first VA mortgage.

Further requirements for the IRRRL program are:

Refinancing must include a reduction in your current interest rate of at least 0.50%, unless the current VA mortgage is an adjustable rate loan (ARM).You must be no more than 30 days past due with your payment in the last 12 monthsYou must pay a VA financing fee of 0.5 percent regardless of previous use or service history, unless you are exempt from the exemption you must be in Be able to recover your borrowing costs and fees within 36 months. Your VA IRRRL lender may request a credit report or credit check. “That means that the refinancing of a second or investment house can be allowed,” says Thaggard. The new loan term may not exceed the original loan term by more than 10 years. "For example, if the original term was 15 years, the new term cannot exceed 25 years," notes Litvin. 2019 and after) Your current VA loan must have been paid for at least six months. You must not be involved in an active deferral or an ongoing bankruptcy

"Borrowers must apply for VA Streamline refinance through a bank, credit union, or mortgage lender that offers this type of loan – not the VA itself," notes Aragon.

Provided you meet VA eligibility requirements, completing a VA Streamline Refi should be relatively quick and easy. Because lenders don't have to check your creditworthiness, employment or commission a new home appraisal, these loans often close faster than other refinances – sometimes within a few weeks.

So you decide for yourself whether the VA IRRRL is worthwhile

If you are eligible for this type of loan and want to save money, VA Streamline refinance makes a lot of sense.

“The VA requires that the loan terms provide an immediate financial benefit to the borrower. Also, there is no limit to the number of times a qualified borrower can use the VA IRRRL program. So if interest rates drop even further in the coming years, you can use this program again at any time, ”explains Fagley.

Aragon agrees. "If the cost savings don't materialize, this is a great option for those who want better terms and a quick and relatively less laborious mortgage process."

Confirm your new price (August 10, 2021)

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