Refinance Options Offered By Veterans United Home Loans Of Hawaii
Military borrowers have access to the most powerful home purchasing program on the market. So it stands to reason that the same would hold true when it comes to a refinance loan.
A mortgage refinance allows borrowers to capitalize on historically low interest rates and carve out some financial breathing room. There are two major VA refinance options, an Interest Rate Reduction Refinance Loan, also known as an IRRRL or a VA Streamline, and a VA Cash-Out Refinance. Each has a different purpose and varying requirements.
A VA Streamline helps borrowers shrink their monthly mortgage payment by refinancing into a new, lower interest rate. Home owners can use a Cash-Out Refinance to lower their rate and take out needed capital.
But these refinance options are alike in one key way – they provide military home owners with unmatched flexibility and a clear path to a brighter financial future.
Veterans who can capitalize on record-low interest rates can lock into considerably lower payments for the life of their loan. That, in turn, generates a monthly savings home owners can plug back into their principal or other wise use as they see fit.
Here’s a brief rundown on the VA’s two main refinance programs.
The “Streamline” moniker isn’t just a clever marketing ploy. The VA Streamline is a no-frills refinance loan that features almost none of the hassle and paperwork that accompanies a conventional refinance. The VA Streamline exists to get veterans into a lower-rate mortgage with lower monthly costs. In fact, that’s one of the loan’s primary requirements. Unless the borrower is refinancing an adjustable-rate mortgage, the Streamline has to lower the interest rate. The VA does not require appraisals or credit checks on
Streamlines, but som e lenders have made them mandatory. We are still able to process some Streamlines without an appraisal , which is a significant benefit for home owners .
Appraisals average about $525, and home values have fallen sharply in some parts of the country. Given the widespread drop in home values, most lenders are turning away refinance applications when the new loan amount exceeds the value of the home.
Home owners have to pay closing costs on a VA Streamline. But these can be rolled into the overall loan amount, along with up to $6,000 in energy efficiency improvements. That means veterans might actually see their principal balance increase after a VA Streamline.
No need to worry, though, as that’s perfectly normal. What’s more important is determining how long those payments will be higher and if the refinance is truly worth it over the long haul.
The VA Streamline is inherently flexible, but there’s one major thing you can’t do with it – get cash back. That’s where the cash-out refinance comes in. The VA’s Cash-Out Refinance loan allows qualified veterans with conventional or VA loans to refinance to a lower rate while extracting cash from their home’s equity. Essentially, you’re getting a new mortgage at a value higher than what you owe and taking the difference in a cash lump. Borrowers have traditionally used Cash-Out Refinance loans to pay off high-interest debts or make home improvements. But there aren’t any concrete constraints on how you spend the money, as long as the lender is on board. Unlike on a Streamline, the VA mandates that cash-out borrowers submit to the standard credit and underwriting process. The loan processing for a cash-out refinance is basically identical to the original VA purchase loan, from the income verification and debt-to-income ratio to a home appraisal.
A Cash-Out Refinance shouldn’t be confused with a home equity loan, which is a second loan that runs alongside your current mortgage. A refinance loan replaces that existing mortgage instead of complementing it.
Veterans can learn more about refinancing and other benefits of the VA home loan at our upcoming free seminars.
-Aloha, Tony Dias
Branch Manager, Veterans United Home Loans of Hawaii NMLS #222836
Upcoming VA Loan Seminars
Veterans United seminars include Powerpoint presentations & free workbooks. Question and answer periods follow the presentations. For more information and directions, call 676-8254.
• Monday, September 17
6 to 8 p.m.
Bayview Golf Course
45-285 Kaneohe Bay Drive, Kaneohe
• Tuesday, September 18
6 to 8 p.m.
Ala Moana Pacific Center
1585 Kapiolani Blvd., Suite 1518
• Tuesday, September 25
6 to 8 p.m.
VA Mortgage Center of Hawaii
94-539 Puahi St., Waipio, HI 96797
• Friday, September 28
6 to 8 p.m.
Kauai Veterans Center
3125 Kapule Hwy, Lihue, HI