Below is an example of how my VA Loan Refinance worked for me and may work for you depending on your situation. With rates at all time lows there are a number of factors to consider if a refinance is right for you.
Starting Situation: I had purchased a home in Massachusetts using my VA Loan for $325, 000 in 2008 at 6% interest rate with my total monthly payment including: principle, interest, taxes, and insurance approximately $2,500.
Change in my Situation: My job required me to relocate to be close to New York City in 2009 and luckily I was able to get my place rented covering my total payment amount.
Motivation to Act: In 2010 the interest rates started declining and in November 2011 when rates were hovering around 4% I decided to refinance locking in a rate of 4% doing a VA Interest Rate Reduction Refinance Loan (IRRL).
Result of my Refinance: My cumulative closing costs and fees were around $4000 and my new payment was just under $2000 therefore I was able to reduce my total payment by $500 a month. I was able to re-coop the $4000 that it cost me after 8 months. After those 8 months I’m able to save $500 a month straight to my bottom line.
2008 Total Monthly Payment: $2,500
2011 Total Monthly Payment: $2,000
2011 Costs Savings per Month: $500
2011 Refinance Cost: $4,000
Months to Re-Coop Closing Costs: $4,000/$500=8 Months
Refinance Month: November 2011
Break even month: July 2012
Starting in August of this year I will have paid off my closing costs and fees and will have $500 a month in true savings that I never had before.
Should you Refinance?
How long to you plan on owning the property?
- If you thinking of refinancing then you should be planning on living in your home long enough to re-coop the cost and fees of doing your refinance.
- The best way to do this is to get a good faith estimate or consultation. You can get a free consultation and good faith estimate here.
What’s your current rate?
Many experts say that a good threshold for looking at whether you should refinance or not is if you can get your rate d0wn by a percentage point.
- VA Loan Captain, Inc. has been refinancing through our program below 3.5%.
- If you are paying 4.5% or higher refinancing may make financial sense.
Do you need cash?
Everyone encounter areas where they need some money for a number of reasons like college, remodeling, ext.
- If for example your student loans are at 6% you would have the option to take money out of your equity at a lower rate to pay off higher paying interest debt.
- Or, if you have credit card debt that you can’t seem to get rid of and paying a high interest rate then taking cash out of your equity at a low interest rate would make sense to pay off very high interest rate debt such as credit cards.
VA Loan Captain is a Service Disabled Veteran Owned Small Business (SDVOSB) that assists veterans and service members purchase or refinance a home at a competitive interest rate with their network of VA Approved Lenders. For every loan closed $200 is provided to a partner veteran focused non-profit.
For more information or to get a no cost or obligation consultation please visit www.valoancaptain.com.