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Popular VA Refinance Options

By Stevie Duffin Updated on 7/28/2017

VA Refinance

If you are looking to refinance your VA mortgage loan, the two popular options to choose from are: VA cash-out refinance or a VA streamline refinance. 

The VA cash-out refinance allows borrowers to extract cash from their home equity, whereas a VA streamline refinance or “interest rate reduction refinance loan” allows borrowers to reduce the interest rate on their original mortgage loan. 

To get a more detailed look at these VA refinance options, Lender411 has provided information to answer common questions on VA refinance loans below.

VA Cash-Out Refinance

A VA Cash-out refinances are for Veterans who want to take cash out of their home equity.  Borrowers repay their current real estate debt using the proceeds from the new mortgage on the same property.  This type of VA refinancing is used for properties that are the principal residence of the owner. 

Except for properties located in Texas, the owner can refinance their VA loan for up to 90% of the home’s appraised value – plus the closing costs if the home meets the loan to value ratio.  Also, borrowers are allowed to finance the VA funding fee and can include $6,000 for energy efficiency home improvements.

Pros of a VA Cash-Out Refinance

  • The cash can be taken out to be used for any purpose.
  • There is no minimum amount of time that borrowers must own their home to be eligible for this loan
  • Borrowers can consolidate debt with a cash-out refinance – it’s less of a credit risk for lenders
  • The VA allows borrowers to get a VA cash-out refinance loan even if they are delinquent on their current mortgage as long as they can make new payments – if it’s a result of debt, lenders can usually consolidate the debt into a new loan

Cons of a VA Cash-Out Refinance

  • The borrower's home must have enough equity to qualify for this type of loan
  • This is a longer and more complicated process than getting a streamline refinance
  • No mortgage late payments in the past 12 months
  • Property must be occupied by the owner

VA Streamline Refinance (also known as IRRRL)

VA streamline refinances are for Veterans who want to lower the interest rate of their original VA mortgage with little to zero cost.  Also known as IRRRL’s (Interest Rate Reduction Refinancing Loans), these loans give borrowers the option of either letting the lender pay the closing costs for a higher interest rate or rolling the closing costs into the new loan. 

The mortgage on the property must have been paid on time for the past twelve months and must be current at the time of refinancing.  One late payment in the past twelve months is acceptable.  Borrowers won’t be able to take out more on the new loan than what is currently owed.  Much like the VA Cash-Out refinance, borrowers can include up to a maximum of $6,000 in the refinance loan so that they can add energy efficient home improvements.

Pros of a VA Streamline "IRRRL"

  • The only fee that the VA charges for an IRRRL is a 1.5% funding fee of the loan value
  • VA doesn’t require income/employment verifications, credit reports, termite reports, or an appraisal for a streamline refinance, unlike a VA cash-out refinance (individual mortgage companies may require these things, but VA does not)
  • Borrowers can refinance loans without any out-of-pocket money by rolling all costs into the new loan or by making the loan at a high enough interest rate to let the lender pay the costs


Cons of a VA Streamline "IRRRL"

  • Borrowers can’t take cash out of an IRRRL
  • No assumptions are allowed


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About The Author:
Stevie Duffin
Stevie is the Senior Editor at Lender411. She manages the site's Authorship Program and social media pages. Stevie graduated from UC Santa Barbara with a BS. Contact her: stevie@lender411com.

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