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VA Refinance and VA Cash-Out Refinance: A Guide

Read Time: 5 Minutes January 24, 2023

We can never fully repay our Veterans. However, one of the ways our country tries to show its appreciation is through VA loans. These loans are part of a specialized class of home loans backed by the U.S. Department of Veterans Affairs. Qualified Veterans have access to features that include eliminating mortgage insurance (MI) requirements, debt-to-income (DTI) ratios similar to FHA Loans, and reduced or no down payment options. 

 

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VA loans are home loans designed with freedom in mind. As a military homebuyer, you have mortgage options with special benefits that you can leverage to achieve your homeownership dreams and financial goals. Since you’ve landed here, it’s likely you’ve already bout your first home. Are you wondering if you could refinance to save money or pay off your loan quicker? Maybe you want to take cash out for home improvements? Either way, you’re in luck, because there’s a VA loan for that!

While we can never fully repay our Veterans for all they do, one of the ways our country shows its appreciation is through VA loans. These loans are part of a specialized class of home loans guaranteed by the U.S. Department of Veterans Affairs. Qualified Veterans have access to features that include eliminating mortgage insurance (MI) requirements, competitive debt-to-income (DTI) to assist a veteran to qualify and reduced or no down payment options. 

The VA Loan Goal: Make Homeownership Affordable

  • Zero down payment option
  • 100% financing available
  • Lower average interest rates
  • No private mortgage insurance required 

Can You Refinance a VA Loan?

Yes. VA-backed loan products are available for refinancing. A bonus of these loans is that they can offer quicker turnarounds compared to other loan types. Additionally, they are ordered through the VA, which can save time compared to a standard loan.

Let’s take a closer look at a few ways Newrez is helping many Veterans save money on their monthly payments or putting their mortgages to work by providing them access to cash.

What is a VA IRRRL (Interest Rate Reduction Refinance Loan)?

The VA IRRRL is a mortgage refinance option for qualified VA borrowers that have an existing VA loan. The IRRRL allows Veterans to refinance to a new VA loan with a lower interest rate or convert a VA loan from an adjustable to a fixed rate.

It's also known as a “VA Streamline” because there’s often less paperwork involved resulting in quicker turnaround times.

  • VA Streamline Refinance (IRRRL) Requirements

THe IRRRL is not available to Veterans with non-VA loans. However, if you have a VA loan and can certify that you live in the home you may be eligible for a VA IRRRL.

Lenders may also have guidelines and requirements regarding how long you've had your current mortgage.

  • Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio, and loan payment history can vary by lender. Additionally, part of the application process involves verifying how many payments have already been made as well as timeframes on recovering the costs and fees associated with the new loan.
  • VA Streamline Refinance (IRRRL) Benefits

There are several advantages to doing an IRRRL aka VA Streamline Refinance. These include little to no out-of-pocket costs and in most cases no VA appraisal. The VA funding fee is lower on IRRRLs than for typical VA purchase and cash-out loans, and some Veterans choose to exercise their option to avoid out-of-pocket costs by rolling the closing costs and fees into the loan balance.

Unlike VA home purchase loans where you need to intend to occupy the property as your primary residence, that is not the case with a VA Streamline Refinance.

What is a VA Cash-Out Refinance?

The VA Cash-Out refinance loan replaces your existing mortgage. It gives qualified veterans the opportunity to refinance their conventional, FHA, or VA loan at a lower rate while turning the equity in your home into cash. Equity is the difference between what you owe on your mortgage and your home's current value.

A VA cash-out refinance encompasses both a VA Rate and Term Refi as well as a Cash-out Refi.

  • VA Cash-Out Requirements

As with a standard VA loan, borrowers must meet credit, income, and appraisal guidelines. Minimum credit scores are also required though vary based on the lender, the loan amount, and other factors. Additionally, you must certify that you intend to occupy the property being refinanced.

Homeowners can finance their closing costs or VA Funding Fee provided they meet lender loan-to-value guidelines

  • Benefits of a VA Cash-Out Refinance

Many Veterans use the extra cash for eliminating debt, making home improvements, paying for college, or even investing. Homeowners often choose the VA cash-out refinance option because it offers the ability to repay the loan over a longer period.

What is a Newrez Home Equity Loan††? 

Newrez Home Equity Loan is our new loan program built specifically for homeowners looking to tap the equity in their house without giving up their current mortgage. Keep your primary mortgage interest rate on your current loan when you secure a second mortgage. This new mortgage product has a fixed interest rate and is disbursed in a lump sum at the beginning of the loan. You’ll start repaying it immediately through fixed monthly Principal & Interest (P&I) payments. Plus, a Home Equity Loan with Newrez is secured by your house. This means you access larger sums of money at lower rates than credit cards or personal loans. 

  • Newrez Home Equity Loan Requirements 

As with a standard VA loan, borrowers must meet credit, income, and appraisal guidelines. Minimum credit scores are also required though vary based on the lender, the loan amount, and other factors. Additionally, you must certify that you intend to occupy the property being refinanced. 

Homeowners can finance their closing costs or VA Funding Fee provided they meet lender loan-to-value guidelines.

  • Benefits of a Newrez Home Equity Loan 

You can use your home equity loan for just about anything. Popular uses include home improvements, college tuition, vehicle purchase and debt consolidation. People often turn to home equity for big milestones and life events, such as a wedding, education, moving costs, vacation, adoption, fertility treatments, or other medical expenses. And the fact that it’s secured by your home allows you to access a larger total amount at a lower interest rate —unlike a HELOC, which typically carries a variable interest rate. A Newrez Home Equity Loan comes with a fixed interest rate. This means zero surprises when it comes to your monthly P&I payments, and no temptation to spend beyond your budget.  

Understand Your VA Loan Entitlement

All VA Loans are backed by the U.S. Government through a VA Entitlement. This Entitlement makes it easier for you to qualify for a loan because it represents the amount that the government would pay to the lender if you were to default - it's like government-sponsored loan insurance that you get automatically for dedicating your service to our country. You can use it for refinancing your current mortgage or purchasing a new home.

 

If you have any questions about your VA Refinance or cash-out options, please call 888-673-5521 to speak with one of our mortgage consultants or click here to review your mortgage options. 

As always, we thank you for your service!

 


 

*https://www.corelogic.com/intelligence/home-equity-gains-reached-new-highs-in-2021/

Disclaimer: by refinancing the existing loan, the total finance charges may be higher over the life of the loan.

Learn more in our other educational series.

We’ve assembled a treasure trove of jargon-free information to demystify home-financing and arm you with valuable insights and actionable options.

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