Will Refinancing My VA Loan Save Me Money?

Will Refinancing My VA Loan Save Me Money?   

You’ve probably heard in the news that interest rates are near an historic 50-year low, and wonder if you should refinance your Veteran's Affairs (VA) home loan. A reduction of just one percentage point could potentially save you tens of thousands of dollars over the life of your loan. For example, let’s say you have a balance of $250,000 on your existing mortgage and you’re paying an interest rate of 4% with monthly payments of $1,194. At 3% interest, your payments could be lowered to $1,054, saving you $140 per month.

But before you start the application process, you want to be sure a refinance of your VA loan will save you money based on your current circumstances. Here are a few factors to consider as you research whether the time is right for you to refinance to save money—on your monthly payments and over the life of your loan:

How Many Years Do You Have Left on Your Mortgage?

To truly calculate your savings from a refinance, you’ll want to consider the full life of the loan. In the example above, do the math to determine whether that $140 monthly savings works out to a savings or expense after 30 years. If you’ve only had your current mortgage for a few years, it likely is. But if you’re closer to paying your mortgage off, it may not be.

How Long Will You Own Your Current Home?

The same principle applies with regard to how long you intend to stay in your current home. If you’re planning a move in two or three more years, it might not be worth incurring the closing costs involved in a refinance. The costs will either be rolled into your loan amount or you would be required to pay them upfront. Be sure to use an online refinance calculator to determine if the time is right for a refinance. Calculate the savings against closing costs and funding fees.

Should you switch to 30-year loan?

Another benefit to refinancing is that you can extend the length of the loan, allowing you to put more money in your pocket each month. Especially if money is tight, this might be a good option. Just understand, that the longer you pay, the more you will pay. Measure your immediate financial needs against future ones.

Should you change from an adjustable interest rate to a fixed rate?

While adjustable-rate mortgages automatically gain the benefits of falling rates without refinancing, rates are about as low as they’ll go. Now may be the time to lock in at a low fixed rate. If rates rise, you will be protected from having to pay a higher amount on your monthly mortgage.

Should you consider a VA Streamline refinance loan?

Officially known as a VA Interest Rate Reduction Refinance Loan (IRRRL), a VA Streamline refinance doesn’t require the typical VA lender underwriting process because you’ve already qualified for a VA loan. That means no home appraisal, inspection, or bank account verification will be required. Note that the VA requires a waiting period of either 210 days from the date of the first payment or after the sixth monthly payments (whichever's longer) before an existing VA loan can be eligible for a Streamline refinance.

Do you need to take cash out?

A refinance can be the perfect time to take cash out from the equity you already have in your home. Think about using it for major repairs and renovations, or to pay down credit cards. If you want to take cash out for any purpose, consider a VA Cash-Out Refinance loan.

Would you like to learn more about refinancing a VA home loan? Turn to the dedicated loan team at NewDay USA. We are a nationwide VA mortgage lender focused on helping active military personnel, veterans, and their families achieve their financial and housing goals. Call us today at 800-405-4187 to learn more about any of our VA home loan products.