If you qualify and apply, you can refinance into a VA loan or cash out up to 90% of the current value of your home with no down payment. VA loan rates are usually lower than standard mortgage rates. The main advantage of this type of refinancing is the low-interest rate associated with Veterans Affairs loans. In addition, if you need to make repairs to your home, it will not interfere with your credit rating. Here are several more advantages that will help you when you decide to pursue this option.
One of the many advantages of VA home purchase loan terms is the flexibility that they offer to veteran homeowners. Most lenders do not offer as much flexibility as a VA lender does. A VA lender may be able to provide additional services and benefits that non-VA lenders are unwilling to provide. These benefits include insurance premiums that are paid on behalf of the veteran. There are also tax breaks provided to most veterans.
Another advantage is the freedom from closing costs and the reduction of the funding fee that accompanies eligibility for a VA home loan. The funding fee is a portion of what the lender charges for a bank-secured loan. It is meant to cover the expenses related to securing the loan. Veterans are often exempt from this fee when they receive their first VA mortgage. However, if you later decide to purchase another home, you will likely be charged with an interest rate as high as you would have qualified with a traditional mortgage.
You may also save money on interest rates if you decide to switch to a VA REFINANCE. Most traditional mortgages come with variable interest rates and balloon payments at the end of the loan term. If you decide to switch to a VA mortgage, you may also qualify for a tax break.
A third advantage is the ability to choose between fixed and adjustable interest rates. Some people prefer to keep current rates on their mortgage while others want to take advantage of lower interest rates. With a refinance, you may be able to choose between the two and only pay for the interest rate you agree with. Even if you end up paying more in total due to switching to a fixed rate APR, you will more than makeup for it in cash.
A fourth advantage is the ability to reduce your monthly payment with refinancing. This is possible because refinancing allows you to negotiate the payment amount. Your interest rate and monthly payment amount can be negotiated before you commit to a new loan. Many homeowners find this option attractive when trying to avoid foreclosure.