For homeowners, there are many reasons to refinance. You may hope to snag a lower interest rate and a lower monthly mortgage payment. You may want to swap an adjustable-rate mortgage for a fixed-rate mortgage to secure a delightfully stable monthly payment. Or, you may want to turn some of your home equity into cash. When it comes to refinancing, there are also lots of options to choose from. Sorting through the alternatives can be overwhelming. The trick is choosing an option that is a good fit for your situation and goals. If you’re considering the possibility of a potential refinance, it’s certainly worth weighing VA streamline refinance pros and cons. After all, VA loans are widely recognized for offering fantastic terms that are hard to beat.
VA Streamline Refinance Pros and Cons
More formally known as the VA interest rate reduction refinance loan, or IRRRL, the VA streamline refinance is one of two refinancing options offered by the U.S. Department of Veterans Affairs (VA). While it certainly comes with some great advantages that can make this loan product the perfect pick for many homeowners, it does have its drawbacks. Learning about both the pros and cons can help you decide if it’s the right choice for you.
Pro: Streamline Refinances Are Speedy
There’s a reason the VA IRRRL is generally referred to as the streamline refinance. As Time reports, you generally won’t have to provide as much documentation or go through another appraisal for this type of refinance. The streamlined requirements reduce the costs and the time needed, making streamline refinances a relatively quick and affordable option for those eager to secure a lower interest rate or better terms.
Con: You Must Have a VA Loan to Use a Streamline Refinance
The reason why a streamlined application process works is that only homeowners who purchased their homes with a VA loan can use a streamline refinance. As the VA explains, borrowers are only eligible for a streamline refinance if they meet all of the following requirements:
- They already have a VA home loan.
- They intend to use the streamline refinance to replace their existing VA home loan.
- They can verify that they either reside in or used to reside in the home that is the subject of the loan.
Pro: Rolling in Closing Costs Is Allowed
Whether it’s a new mortgage or a refinance, closing costs are an inevitable part of taking out a home loan. The total for these costs can be in the thousands, and coming up with the cash out of pocket can be difficult for some homeowners. One alternative is to roll your closing costs into your new mortgage. While going this route ultimately adds to the amount that you borrow, it can provide some welcome breathing room if your finances are tight. As The Balance makes clear, the streamline refinance gives borrowers the option to roll in any closing costs, including the VA funding fee.
Con: You Cannot Cash Out Home Equity with a Streamline Refinance
If you are hoping to turn some of the equity that you’ve stored up in your home into cash, then you’ll need to choose another refinancing product. As Forbes explains, the VA streamline refinance does not allow you to cash out any equity. In fact, the only way that you’re allowed to get cash when you use the streamline refinance is to seek reimbursement for up to $6,000 in energy-efficient home improvements that you completed in the 90 days before closing. If you want to use a VA refinance to cash out some of your home equity, you’ll need to use the VA cash-out refinance loan instead. That is also the best choice for someone who wants to refinance a non-VA loan.
Are you interested in digging deeper into VA streamline refinance pros and cons? Do you want to explore how the VA streamline refinance stacks up against other popular refinancing options? Would you like expert help figuring out which product is the best match for your situation? Reach out to PrimeLending: Manhattan, Kansas. We would be happy to assist you. We offer personalized service from friendly, knowledgeable professionals who take the time to listen. Contact us today to discover more about our services and learn how we can help you reach your housing goals.