VA Home Loan Refinance Guidelines On Rate-Term And Cash-Out

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This BLOG On VA Home Loan Refinance Guidelines On Rate-Term And Cash-Out Was UPDATED And PUBLISHED On March 31st, 2020

What are the VA guidelines for housing loan refinancing on interest rates and payouts

VA Home Loan Refinance Guidelines Explained

The United States Department of Veteran Affairs is the government entity that is responsible in setting and implementing mortgage lending guidelines and regulations on VA Loans.

  • VA Loans are originated and funded by banks and mortgage companies who are approved by the U.S. Department of Veteran Affairs
  • VA Loans are guaranteed by the Department of Veteran Affairs in the event the veteran defaults on his or her VA Loan
  • VA Loan is probably the best mortgage loan program out there where it does not require any down payment on a home purchase
  • Homeowners can refinance their home and do a 100% loan to value cash-out refinance mortgage
  • Unfortunately, VA Loans is not for everyone
  • Homeowners need to be a veteran of the United States Armed Services with an honorable discharge
  • Need to have a Certificate Of Eligibility
  • VA Loans offer the lowest mortgage interest rates out of all loan programs

With interest rates still being at historical lows, many veterans with a Certificate Of Eligibility are rushing into exploring refinancing their home with a VA Loan.

VA Home Loan Refinance Guidelines And Net Tangible Benefit For Homeowners

VA Home Loan Refinance Guidelines state the requirements for refinancing a home loan into a VA Loan.

  • The main reason most homeowners refinance is to lower their monthly mortgage payments by refinancing their home loan to a loan with a lower rate and save money
  • A refinance mortgage loan will pay off an existing home loan and replaces it with a new mortgage loan
  • Homeowners who refinance their current home loan can expect to go through the same mortgage process as when they first went through their home purchase loan
  • Before a homeowner commits to a refinance mortgage loan, they should consider that there are closing costs associated with refinancing

Closing costs can add up to several thousand dollars.

Break-Even To Recoup Closing Costs On Refinances

Homeowners need to know how much money they will be saving every month and how long will the sum of the savings total the closing costs spent on their home refinance:

  • This will determine the break-even point of their refinance mortgage
  • For example, if new refinance on new VA Loan will save you $200 per month and closing costs will be $2,400, the break-even period will be 12 months
  • It will take you 12 months in saving $200 per month to get $2,400 in closing costs back
  • After the 12 months, the borrower will be break-even
  • Actual savings of $200 per month will begin after the break-even point

If homeowners plan on selling their home in less than 12 months, it will not be worth their while to refinance.

How Long Are You Planning On Staying At Your Present Home

How Long Are You Planning On Staying At Your Present Home

However, if planning on staying in their home for more than 12 months, it will make sense for homeowners to refinance their home loan:

  • Everyone’s break-even point is different
  • It may take some homeowners over 5 years to reach their break-even point

However, if the homeowner plans on staying in their home for over 10 years or longer than taking 5 years to reach the break-even point is worth it to refinance.

Benefits With Refinancing To VA Home Loans

Homeowners should only refinance their home loan only if it provides benefits from refinancing their home loan.

  • The biggest benefit of refinancing their current home loan is to reduce their monthly housing payment
  • Homeowners can use the excess savings in paying other expenses or save
  • Many homeowners take advantage of a 15 year fixed mortgage rate refinance loan
  • This is because mortgage rates on 15 year fixed rate mortgage loans are substantially lower than 30 year fixed rates
  • Other major benefits with refinancing with a 15 year fixed rate mortgage programs are because, with 15-year fixed-rate mortgages, a homeowner will be able to pay down their loan balance much quicker
  • Homeowners can save tens of thousands of dollars in mortgage interest expenses
  • Homeowners who have equity in their homes and may be in need of cash due to repairs needed or pay off debts

VA borrowers can get up to 90% loan to value cash-out refinance mortgage loans at low-interest rates.

Benefits To Refinancing To VA Loans

VA Loans is probably the best mortgage loan program in this country.

  • VA Loans offer zero down payment
  • Since VA Home Loans is insured by the United States Department of Veteran Affairs, lenders have nominal risks when originating and funding these Loans
  • This is because in the event the veteran defaults on his or her home loan, the Department of Veteran Affairs partially guarantees the loan
  • Due to the guarantee by the Department of Veteran Affairs,  lenders can offer veterans low mortgage rates
  • Mortgage interest rates are substantially lower than FHA Loans and Conventional Loans
  • Many veterans who did not purchase a home with a VA Loan and bought their home with an FHA Loan, Conventional Loan, or  USDA Loan can refinance their current mortgage loan with a VA mortgage
  • Veterans who need a cash-out refinance mortgage can refinance their current home loan with a VA Cash-Out Refinance Mortgage Loan

They can get up to 90% loan to value.

VA Home Loan Refinance Guidelines On Cash-Out

What are VA's guidelines for paying back a home loan?

The real estate market has been recovering throughout the United States.

  • Areas in Kentucky, New Jersey, Mississippi, Georgia, Michigan, Colorado, Pennsylvania, Florida, Ohio, Indiana, Illinois, Texas, and California have had double-digit increases of property value year after year for the past several years
  • Many homeowners have seen phenomenal increases of their property values due to the hot real estate market
  • Homeowners in need of cash can do a cash-out refinance mortgage loan
  • They can draw cash out of the equity in their homes and use it for other investments, pay off credit card debt, pay off tax liabilities, pay off student loans, or pay off other debts or just have cash ready in the event of a rainy day
  • FHA Loans require a maximum of 80% loan to value on an FHA cash-out refinance mortgage loan
  • With Conventional Loans, the maximum loan to value on a cash-out refinance mortgage loan borrowers can get is 80% loan to value
  • USDA Loans prohibit cash-out refinance mortgage loans
  • USDA mortgage borrowers can only do a rate and term refinance mortgage
  • The United States Department of Veteran Affairs, or VA, will allow up to 100% loan to value cash-out refinancing

If you are a veteran with a Certificate Of Eligibility and are interested in a home purchase VA Loan or a Refinance VA Loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The Team at Gustan Cho Associates are available 7 days a week to take your phone calls or reply to your email inquiries on VA Loans or any other mortgage loan program.

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