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It depends on your goals along with the terms of your new loan. Lowering the interest rate on your current loan is an ideal reason to refinance. Generally, refinancing is a good idea if you can reduce your interest rate by at least 2 percent, and you’ll find plenty of lenders who will tell you that 1percent savings is enough of an incentive to refinance.
Reducing your interest rate saves money while increasing the rate at which you build equity in your home, and, naturally, it can decrease the size of your monthly payment. Refinancing to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage is another popular reason people look into refinancing.
It depends on which type of refinance program you choose. If you currently have a VA-backed home loan but want to reduce or stabilize your monthly mortgage payments, you might consider an interest rate reduction refinance loan (IRRRL). It’s also called a streamline refinance because it requires minimal paperwork, no income verification, no home appraisals, low funding fee, faster closings, and you’re allowed to roll the closing costs into the loan. An IRRRL is a powerful, easy-to-use lending option that replaces your current loan with a new one under different terms. Note that you cannot refinance a non-VA loan with an IRRRL.
If you select to refinance using a cash-out loan, you can take cash out of your home equity to pay off debts, make home improvements or use the money however you choose. Unlike the IRRRL, the cash-out allows you to refinance a non-VA loan into a VA-backed loan. But remember that the cash-out loan is fully documented. Your lender will require copies of paycheck stubs for the most recent 30-day period and W-2 forms for the previous two years. They will also order a home appraisal and an expert assessment of the value of your property.
An interest rate reduction refinance loan (IRRRL) is also known as a streamline refinance because it requires minimal paperwork, no income verification, no home appraisals, low funding fee, faster closings, and borrowers can roll the closing costs into the loan. An IRRRL is a powerful, easy-to-use lending option that replaces a current loan with a new one under different terms. Note that you cannot refinance a non-VA loan with an IRRRL. Another plus with a streamline loan is that they close in about 30 days.
Veterans can avail themselves of several particular loan options, including the VA cash-out refinance, which allows refinancing up to 100 percent of the property’s value, letting the homeowner tap into all of the available equity. You can use the cash-out refinance program even if the current mortgage isn’t a VA loan. A cash-out loan is fully documented. Your lender will require copies of paycheck stubs for the most recent 30-day period and W-2 forms for the previous two years. They will also order a home appraisal and an expert assessment of the value of your property. A cash-out refinance, like a standard loan, takes about 30 to 45 days to process.
Like any other mortgage, a VA refinance loan comes with various closing costs and other expenses. Generally, these fees range from about 3 to 5 percent of the loan amount. Note that fees can vary depending on the property location and the lender.
Absolutely. You can refinance conventional and FHA mortgages into VA loans.
For instance, a VA cash-out refinance replaces an existing loan with a VA loan and pulls equity out of the subject property in the form of cash. A cash-out loan is fully documented, meaning that the borrowers must supply their latest paycheck stubs, W-2 forms, and two-year federal tax returns to the VA lender. The amount of cash available to the borrower is determined by evaluating the property’s current appraised value. Typically most VA lenders will allow a cash-out loan amount up to 90 percent of the appraised value.
Different types of mortgages have different rules. But to refinance into a VA loan, you have to wait at least 210 days from the time you make the first payment on your existing loan to the closing date of your new loan. This requirement applies whether you’re getting a VA cash-out refinance or an IRRRL.
Because an IRRRL or streamline refinance requires fewer financial documents and no appraisal, you can usually close in about 30 days. A cash-out refinance follows the path of standard loans and takes about 30 to 45 days to close.
Yes, a cash-out refinance can impact your credit score because it replaces an old debt with a new loan that lowers the average age of your credit, potentially causing a dip in your credit score. The lender will pull a hard inquiry, which also impacts your score. However, if you have a solid payment history with your previous mortgage, you should only notice a slight, temporary decrease in your score.
Of course. At Aligned Mortgage, we are happy to offer quotes without a commitment from you.