If you or your spouse are a veteran, you may be able to lock in a lower mortgage rate by refinancing with a VA refinance loan. Refinancing your mortgage through a VA refinance loan could reduce your interest rate, make monthly payments more affordable or shorten your loan term so you can pay off your mortgage faster.
Just like VA loans, VA refinance loans are backed by the US Department of Veterans Affairs, which makes them especially secure loans in the eyes of private lenders that issue them. If you are eligible for a VA refinance, you can take advantage of lower interest rates — especially if you’re refinancing from a conventional loan. Conventional loans and refinances tend to have higher interest rates and more fees than VA options, which is why VA refinancing can be particularly appealing.
Here’s everything you need to know about VA refinance loans, who is eligible and what current rates are.
Current VA refinance rate trends
Right now, VA refinance interest rates are hovering between 4.5%-5%, compared to the 30-year fixed-rate for conventional refinances which has inched up to 5.5%. Mortgage rates overall have been rising since the beginning of this year and are expected to keep going up over the course of 2022. Rates are increasing in response to inflation and the Federal Reserve hiking interest rates at the fastest pace in two decades.
Although some volatility in mortgage rates is anticipated as concerns grow over the potential slowing of the economy, generally speaking you can expect rates to keep climbing throughout the year… which is why refinancing now rather than later is more likely to help you secure a lower interest rate, a move that could save you thousands of dollars over the lifetime of your mortgage.
What are VA refinance loans and who should consider one?
To qualify for any type of VA loan, refinance loans included, you must be either an active or retired member of the military, or the spouse of one.
Refinancing (whether through a VA or conventional refinance) allows you to replace your existing home loan with one that typically has a lower interest rate and a new loan term that will offer valuable savings over the long run.
There are many different reasons to consider refinancing. If you want to shorten your loan term and pay off your mortgage faster, you can refinance from a 30-year mortgage into a 15-year mortgage. Doing this will decrease the amount of interest you pay over the lifetime of the loan, but it will increase your monthly mortgage payment.
If your current mortgage rate is high, you also might be able to lock in a lower rate, which could decrease your monthly payment. Doing this could free up cash flow available for other expenses like car payments, high-interest debt, home improvements or education expenses.
Pros of a VA refi
- Lower interest rate: You will pay a much lower interest rate compared to a traditional 30-year or 15-year refi, potentially saving you tens of thousands of dollars over the course of your new home loan.
- No down payment required: There is no down payment needed to complete a VA refinance.
- No private mortgage insurance requirement: If you refinance a conventional loan with less than 20% equity in your home, you typically need to purchase private mortgage insurance, but no mortgage insurance is necessary for VA refinancing.
- Less stringent credit requirements: Like regular VA loans, VA refinance loans tend to allow for lower credit scores and incomes than conventional refis.
Cons of a VA refi loan
- VA funding fee: Although it’s a one-time expense, this upfront fee can add thousands onto the total cost of your refinance. However, it…
Read More: VA Refinance Rates for June 2022