There are many reasons to consider refinancing. You may want to get a lower interest rate or change your loan term. You might be interested in cashing in some of your equity or buying out someone who’s currently on the deed. Alternately, you might want to get rid of private mortgage insurance or change from an adjustable-rate loan to a fixed-rate loan or vice versa. Could a VA streamline refinance help you reach your goals? Exploring the pros and cons of VA streamline refinance can help you find out.
The Pros and Cons of VA Streamline Refinance
The VA streamline refinance goes by several names. It’s formally known as the Interest Rate Reduction Refinance loan, or IRRRL, and commonly referred to as a VA-to-VA loan. Regardless of which title you prefer, this form of refinancing is designed to offer borrowers who used a VA loan an easy way to refinance into a new VA loan.
Like any form of financing, the VA streamline refinance has both pros and cons. If you’re wondering if it’s the right choice for you, you’ll want to evaluate both carefully.
The VA streamline refinance offers a variety of benefits to borrowers (source):
- It can be used to secure a lower interest rate. Refinancing to secure a lower interest rate can lower your monthly payment and the total cost of your home loan.
- It can be used to switch between certain loan types. Do you want to escape the uncertainty that goes with an adjustable-rate loan by switching to a fixed-rate loan? Are you willing to accept the inherent risk of an adjustable-rate mortgage in return for a chance to automatically capitalize on falling interest rates? You can make the switch with a VA streamline refinance.
- It requires less paperwork. Opting for a VA streamline refinance means that you won’t have to provide income, employment, or bank account verification. You’ll also get to skip the credit check and the home appraisal.
- It’s faster. Because so many of the normal requirements are waived, VA streamline refinances are processed more quickly than many other refinancing products.
- It can be completed without out-of-pocket expenses. Borrowers have the option of rolling any closing costs into the new loan.
- You can choose your lender. Although you may choose to return to your original lender, you don’t have to. You can shop around to find the lender that offers the right mix of amazing service and competitive terms.
- You can use it for an investment property. While most VA loans are only suitable for purchasing your primary residence, a VA streamline refinance can be used on an investment property as long as you previously lived there.
Nothing is perfect. As Military.com explains, the VA streamline refinance has a few drawbacks:
- You must be refinancing an existing VA loan. These loans are called VA-to-VA loans for a reason.
- You can only get cash out in very specific circumstances. The majority of borrowers cannot get cash when refinancing this way. However, you may request up to $6,000 in funding earmarked for energy-efficient home improvements.
- Your new interest rate must be lower than your old one to qualify. The only time that you’ll be granted an exception to this rule is when you’re switching from an adjustable-rate mortgage to a fixed-rate mortgage.
- No other loan can be paid off with the proceeds. In addition, any other loans must be subordinate to the new VA loan.
Would you like to dig deeper into the potential pros and cons of VA streamline refinance? Are you wondering how these benefits and drawbacks translate to your situation? Turn to the expert loan team at PrimeLending: Manhattan, Kansas. We work diligently to help every customer identify the best loan product for their housing goals, and we’re always delighted to serve those who have served. Contact us today to learn more about a VA streamline refinance and other refinancing possibilities.