Those who served our nation have access to one of the most powerful home loan programs on the planet, the VA loan. That also includes a couple of the most flexible and financially beneficial refinance programs available to consumers.
Cash-out refinancing loans and interest rate reduction refinancing loans (IRRRL or VA streamlines) are two primary, VA-guaranteed options for veterans looking to lower or reorganize their VA loan payments.
Cash-Out Refinancing Loans
Veterans in need of refinancing a lien against their home can pursue a cash-out refinancing loan. Lenders will conduct a full appraisal and credit check, but veterans could receive a loan amount that is 100 percent of the appraised value. Should the loan amount exceed the amount needed to pay off the lien, veterans can take the difference in cash pending the lender’s approval.
Interest Rate Reduction Refinancing Loans (IRRRLs)
While cash-out refinancing requires veterans to take out the loan on their primary residence, IRRRLs only require the borrower prove prior occupancy of the property. The major benefit of IRRRLs is refinancing a VA loan at a lower interest rate. Borrowers can either reduce the original VA loan’s interest rate or convert a VA adjustable rate mortgage (ARM) loan to a fixed rate. Unless borrowers are converting an ARM loan, the monthly principal and interest will decrease.
Lenders may require an appraisal, credit check and underwriting, but the VA does not require these for IRRRLs, thus reducing paperwork for veterans. As an added IRRRL perk, veterans can add up to 10 years to the original loan term, as long as the total does not exceed 30 years and 32 days.
Just like VA loans, these refinancing options offer advantages to veterans that conventional options don’t match.