Refinance Tips for the VA Streamline Loan
If you’re currently holding a VA mortgage and optimistically keeping an eye on current mortgage rates you’re probably thinking about refinancing your existing loan into another one using the VA streamline loan, which the VA refers to as the IRRRL, or the Interest Rate Reduction Refinance Loan. That’s quite a mouthful so VA lenders and veterans alike usually refer to the program simply as the VA streamline. As long as the existing loan is a VA loan, the streamline is your best option.
VA streamlines require much less documentation compared to the VA loan you received when you first purchased the home. So how do you know you’re ready for a streamline? If rates are lower than what you have now, run a few numbers starting out. Pay less attention to the rate but what the rate represents—your mortgage payment. Don’t forget that you’re reducing the interest paid on your note, not simply lowering your rate. That may not make much sense at first but there will be closing costs on your loan. To decide whether or not a refinance is a good decision, divide the difference in the monthly payments into the closing costs needed to approve your loan. The answer is how many months it will take to recover your closing costs and enjoy the reduced interest.
It’s really not a good idea to pay points while refinancing, either. A point is one percent of your loan amount but will not lower your monthly payment enough to offset the added expense of the point paid. Always go for the zero-point option. In fact, you might want to go it one further and ask your VA lender about a no-cost VA refinance. By adjusting your VA rate upward just a bit, you may avoid closing costs paid to third parties. The increase in payment is typically marginal and you won’t be encountering a new round of fees.