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Can I Refinance a VA Loan?

What you'll learn: Options for refinancing a VA Loan

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If you already have a VA loan, you're probably aware of the many benefits this type of loan provides. Even so, there may come a time when you might consider refinancing your VA loan. The good news is that VA loan refinancing can provide many of the same benefits as conventional loan refinancing.

What are the options available for VA loan refinancing?

1. Interest Rate Reduction Refinance Loan (IRRRL). There are two main choices for refinancing your VA loan. The first is an IRRRL, or VA Streamline refinance. In general, you can refinance using an IRRRL to reduce your interest rate and save money over the life of the loan.

Some of the benefits of an IRRRL include:

  • A lower interest rate, if available
  • No appraisal
  • No monthly private mortgage insurance (PMI)

VA IRRRL eligibility typically requires that the current loan be verified as no more than 30 days past due on the date of closing.

There may be a funding fee when refinancing an IRRRL, and for most borrowers, the fee for an IRRRL is .5% of your loan amount. You may qualify for a funding fee exemption.

2. VA Cash-Out Refinance. The other main option for VA refinancing is a VA cash-out refinance. When using this type of refinancing, a borrower can tap into the equity in their home and use it as cash. 

Some of the benefits of a VA cash-out are:

  • Refinance a construction loan to VA loan
  • Refinance an existing loan to take advantage of cash equity
  • Refinance a non-VA loan to a VA loan

For a VA cash-out refinance, you have to be living in the home. With an IRRRL, you don't currently need to be living in the home. You may also need to provide additional information to your lender for a VA cash-out refinance such as pay stubs, tax returns, and more. You will also need to qualify for a Certificate of Eligibility (COE).

Before you begin to think about refinancing, it's really important to understand what your goals with refinancing are. Review your loan interest rates compared to the current available rates you can qualify for to determine the financial benefits. Keep in mind that if you refinance, you may end up extending the life of your loan. For example, if you already paid off five years of your loan but want to refinance because of interest rate savings, you will extend the life of your loan by five years. Be certain to review all of the implications of refinancing after defining your financial needs.

To learn more about PenFed home loans and refinancing options that are right for you:

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