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Comparing VA Refinancing Loans

VA refinancing loans are quire popular these days, thanks in no small part to a troubled economy, current unemployment numbers and a host of other factors. The Department of Veterans Affairs offers two major refinancing options, each one with different rules. VA Interest Rate Reduction Refinancing loans and VA cash-out refinancing each have their own requirements that make them suitable for some VA mortgage holders but not right for others.

One of the first things to look at when considering VA refinancing? The rules governing VA loan entitlements. On an IRRRL, the borrower gets to re-use the original entitlement on the VA home loan. Taking out an IRRRL doesn’t change the amount of entitlement the veteran has left over after the original loan. That’s a big help for someone trying to lower his or her monthly payments on a VA mortgage.

Contrast that benefit with the rules for the VA cash-out refinancing loan, which include requiring the borrower to have enough entitlement left over after the original home loan to use for the refinancing loan. A VA cash-out refinancing loan can be used on any mortgage, whether it’s a conventional or VA home loan. VA requirements do state that when a borrower wants to refinance a VA home loan the entitlement can be restored to refinance the property—not so with conventional or sub-prime loans.

There are two important features of VA refinancing loans that are exactly the same in both cases. Both IRRRL and cash-out refinancing loans require the borrower to certify that the home is used as the primary residence, and both loans also have a maximum term limit. For IRRRLs, the maximum is the original term of the loan plus ten years, not to exceed 30 years and 32 days. For cash-out refinancing loans the term is simply 30 years and 32 days.

About Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.

4 Responses to Comparing VA Refinancing Loans

  1. samuel g. standifer says:

    i am an army veteran of 23 yrs. i am refinancing my home. i have a va rider and they are charging me for a funding fee of $4158. my home is valued at 140k.
    i plan to close this evening.
    why so much?

    • admin says:

      The VA funding fee on a subsequent use purchase or a cash out refinance is 3.3%. If the Veteran has a minimum VA disability of 10%, then the VA funding fee is waived.

  2. Can I refinance a FNMA mortgage with a VA Mortgage?

    • Joe Wallace says:

      With any VA refinancing question, there are a number of questions that need to be answered first. Is the existing loan current, delinquent, or facing foreclosure? What kind of refinancing loan do you seek? Cash-out refinancing, for example, is available on VA-to-VA refinancing deals if the borrower has enough equity in the home and enough VA entitlement to apply. In general, the VA does allow refinancing from conventional to VA loans thanks to the Veterans’ Benefits Improvement Act of 2008. A VA press release states “Veterans who wish to refinance their subprime or conventional mortgage may now do so for up to 100 percent of the value of the property. These types of loans were
      previously limited to 90 percent of the value.”

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