A popular refinance option has been the Home Affordable Refinance Program (or HARP 2.0). But hold on a second! HARP has its limitations. It’s most notable limitation is that it is a program available only to homeowners whose loan is owned by Fannie Mae or Freddie Mac.
So, your VA mortgage loan is not eligible for a HARP refinance. Did you know that those with a VA loan should strongly consider a VA streamline refinance instead? A VA streamline loan is better than the HARP program in several ways:
- It does not require an appraisal.
- It does not require private mortgage insurance (PMI). (This fact alone can save you a hundred dollars a month and more on your mortgage payment.)
- It does not require income or asset documentation.
- It has more lenient qualification standards.
Five Reasons to Refinance
Here are 5 strong reasons why a VA streamline refinance could really benefit you financially:
- Refinance to lower your interest rate. I have made the point before, interest rates are near a record low. And as I write this, 30-year mortgage rates are hovering above 3 percent and 15 year loans can be secured for an even lower rate. If your home is now financed at a higher interest rate, it may be a great time for you to consider refinancing. You could literally save tens of thousands of dollars just by taking the time to fill out the necessary paperwork and gather the needed documents. Take advantage of expert help and talk to your VA mortgage loan expert.
- Refinance to shorten the term of your loan. If you have a 30-year mortgage, now may be a great time to consider refinancing. With record low interest rates, that 15-year mortgage may not be much more expensive than the 30-year loan payment. An experienced veteran loan expert can tell you in just minutes if this kind of a refinance makes sense. (When I refinanced our home from a 30-year mortgage at about 6 percent to a 15-year mortgage at 3.625 percent, the payment only increased by about $100.)
- Refinance to lower your payment. Refinancing to a lower VA interest rate could mean drastically reducing your payment and saving tens of thousands of dollars in interest. Lowering your mortgage payment is a great strategy that can free up hundreds of dollars per month for investing or saving. Although refinancing to lower your payment could increase the term of your loan, it could make sense in your particular situation.
- Refinance to cash out home equity. A VA cash out loan could be a great financial move in some circumstances. For instance, it may make sense to cash out some of your home equity in order to buy an investment property or start a business. It mostly depends on what you are trying to achieve and if you are someone who can manage your debts responsibly.
- Refinance from an ARM to a fixed rate loan. If you currently have an adjustable-rate mortgage, now may be the perfect time to refinance into a fixed-rate loan. Interest rates are low now, and projected to remain low, but they won’t remain this low forever. Locking into a low fixed rate can protect you from rising interest rates in coming years. Additionally, a fixed payment is easier to plan and budget for.
Can Refinancing Help You with Your Financial Goals?
Make a quick review of your financial goals What are you planning for your financial future?
- Do you want to lower your monthly mortgage payment?
- Do you want extra cash flow for savings or investment?
- Do you want to pay off your mortgage and get out of debt faster?
This is a rare moment in the history of home mortgage rates; your’s is a rare opportunity with VA interest rates a remarkable value. With some thorough research and planning, refinancing your mortgage could turn out to be the best thing for your family and for your pocketbook.