As discussed in a previous post, there are numerous benefits in applying for and using a VA loan. Of these benefits, the refinancing options available tend to rank at the top of the list. For individuals who already have a VA loan or those who qualify but have yet to take advantage of these options, refinancing is made relatively easy.
What Is Refinancing?
In general, refinancing allows loan holders to replace existing loans for the sake of achieving a lower monthly payment or a lower interest rate. Doing so can help individuals better manage their finances, save on mortgage payments, and pay off their loans faster. VA loans provide unique opportunities for refinancing that are not available with other kinds of loans.
Streamline Refinance or Interest Rate Reduction Refinance Loan (IRRRL)
Obtaining a streamline refinance is a fairly simple process that requires minimal costs and documentation. With a streamline refinance of a VA loan, borrowers can achieve a lower interest rate for their loans, meaning that they will save more money on a monthly basis. In order to benefit from a streamline refinance, individuals must have an existing VA loan on the property they are looking to refinance; in some cases, lenders may require a certificate of eligibility, though such documentation is not required by the VA.
The other kind of refinancing available to VA loan holders is known as a cash-out refinance. Unlike the streamline refinance, a cash-out refinance is available to any veteran, even those without an existing VA loan. With this kind of refinancing, veterans with any kind of loan are able to tap into the equity of their property and obtain cash to use for things like repairs, renovations, or debt repayment.
VA loans offer increased flexibility when it comes to refinancing options. Whether an individual wants to refinance an existing loan into a VA loan or benefit from the cash-out ability, VA loan refinancing allows individuals to better manage their finances in multiple ways. In addition to the other benefits that VA loans host, these refinancing options further prove that veterans and active-duty service members should be taking full advantage of these loans.