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.