The Best Mortgage Re-Finance Program VA IRRRL Streamline Or VA Cash-Out
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, on top of potentially deferring up to two months of mortgage payments. 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. Homeowners can use a Cash-out Refinance to lower their rate, take out needed capitol from equity, or both.
But these refinance options are alike in one key way – they provide military homeowners 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 homeowners can plug back into their principal or otherwise use as they see fit.
Here’s a brief rundown on the VA’s two main refinance programs:
VA IRRRL Streamline
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 can 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 some lenders have made them mandatory. We are still able to process some Streamlines without an appraisal, which is a significant benefit for homeowners. Appraisals average about $525. Homeowners have to pay closing costs on a VA Streamline, but these can be rolled into the overall loan amount.
VA Cash-Out Refinance
On a VA Cash-Out, the bonus is that qualified veterans can refinance up to 100 percent of their home’s appraised value at Veterans United. Some lenders opt to refinance only up to 90 percent. We are among the relatively few who can refinance up to 100 percent of the home’s value to cover the mortgage as well as any other liabilities that may appear on the borrower’s credit report, or up to 90 percent if the borrower wants to extract cash, up to $325,000. There are some restrictions and limitations, so it’s best to talk with one of our refinance specialists.
Borrowers don’t actually have to take out any cash. It’s just that this is the only option to jump into the VA loan program from a conventional or FHA loan.
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. Unlike 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 programs at our upcoming free seminars. Please see highlighted box in the next column for dates and locations. We also invite you to contact Veterans United Home Loans of Hawaii at 677-5626 (LOAN) to arrange a meeting with one of our experienced loan officers…there is no cost for a private consultation.
“You’ve served our country. Now let us serve you.” – Aloha, Tony Dias