A movement is afoot to refinance home loans. The impetus behind the desire of so many mortgage holders to make a big change to their loan terms is simple. The opportunity exists to save money on a home loan through much lower interest rates. Not all borrowers are going to find it easy to refinance. Veterans who took out VA loans to acquire property, however, may find the opportunities to acquire lower interest rates to be easy to grasp.
The Department of Veterans Affairs has excellent refinance programs in place to support the goal of getting a better deal on a home loan.
Refinancing through the VA allows for gaining another exceptional benefit. 100% of the loan can be refinanced. Through 100% refinancing, the previous mortgage can be dropped down a memory hole and the higher rates of interest won’t negatively impact personal finances anymore.
The Two Refinancing Plans Offered by the VA
There are two specific refinancing plans offered by the VA. The first is the Interest Rate Reduction Refinance Loan (IRRRL). The second is the VA cash-out refinance loan.
The IRRRL program is somewhat limited in scope, but it does serve the purpose the applicant seeks from it. The IRRRL refinancing strategy provides very easy rules and requirements for refinancing an existing VA loan. Saving money is possible with this plan. Actually, saving money is required since the loan mandates the new interest rate must be lower than the old one. Applicants cannot use the IRRRL program to change terms awhile increasing the interest rate.
The VA cash-out loan comes with a bigger “landscape” in terms of what the loan can be used for. With the VA cash-out loans, the refinancing can be used for not only VA loans but any type of home mortgage. Yes, that means the cash-out program assists with refinancing mortgages that a private bank issued.
Those who went with a costly mortgage because it was the only thing available probably will be thrilled with the chance to switch to a better deal backed by the Department of Veterans Affairs.
VA Cash-Out Loan Features
While there are some solid mortgage deals available in the financial world, not all of the deals are great for the long-term. An untold number of foreclosures resulted from problems deriving from adjustable rate mortgages and the APR increases they deliver over time.
A VA cash-out loans provide a possible reprieve to a wide range of loans. The wide range would include some very troubling loans. In addition, there is another added item of flexibility associated with a VA cash-out loan.
The option exists to borrow against the equity of the home while refinancing. With the IRRRL loan, this is not possible. With the VA cash-out loan, refinancing the loan and borrowing an additional amount for debt consolidation, home improvement, and so on is possible. The added amount beyond the refinancing is lumped in with the mortgage balance.
Repaying the New Loan
Refinancing to get a better interest rate is a solid way to save money. Simply accepting a new loan with a lower rate of interest does not automatically mean repayment is smooth. With a VA cash-out loan, any adding of addition debt on top of the mortgage refinancing comes with the responsibility of paying an increased debt amount. The inability to do so could create financial problems.
With both the VA cash-out and the IRRRL program, it may be possible to change a 30-year mortgage to a 15-year mortgage. A 15-year mortgage is going to come with a higher monthly minimum payment since the final payoff date comes up so much more quickly than a 30-year mortgage. Financially managing the higher monthly payments must be done properly or else financial strain may set in.
A Good Deal at Hand
A mortgage should be a relatively easy loan to deal with. Changes in a financial situation might not complement the ability to cover mortgage payments. Refinancing is one way to set a course correction, but not everyone is able to acquire a good refinancing deal. Veterans are lucky in the sense VA loan refinancing plans make things so much easier.