There’s been major demand from homeowners to refinance their mortgage. CNBC reports that applications to refinance a home loan jumped 105 percent in 2019 compared to the previous year.¹ That’s because interest rates have been setting record lows, making it the best time for homeowners to consider refinancing. You can find out what the current rates mean for homeowners by searching online.
Veterans have additional refinancing options that are backed by the U.S. Department of Veteran Affairs. If you’re a veteran, search online to learn more about what this means for you.
Here’s what veterans should know about refinancing their mortgage.
Why You Should Consider Refinancing
Not everyone might be familiar with what it means to refinance your mortgage. Essentially, it means paying off an existing loan by replacing it with a new one.
There are several reasons why this might be ideal for current homeowners.²
1. You Could Score a Lower Interest Rate
If interest rates are reaching lows that could save you money, then refinancing might be a smart decision. You could save hundreds to thousands of dollars each year on mortgage costs by taking advantage of a lower rate.
According to Investopedia, refinancing is a good idea if you can reduce your interest by at least one to two percent.³
2. To Change the Length of Your Term
Another change you can make when refinancing is the length of your loan’s term. This means you can shorten it to build equity faster.
By scoring a lower interest rate, homeowners could put those savings toward paying down your loan balance. For example, a lower interest rate could allow a homeowner to pay off their mortgage in a 20-year term instead of their current 30-year term.
3. To Convert the Type of Mortgage Rate
There are two different types of mortgage rates. One is an adjustable-rate mortgage, where the rate could rise or lower as time goes on. The second is a fixed-rate mortgage, where your rate stays the same during your term.
If you decide to switch from an adjustable-rate mortgage to a fixed-rate mortgage or vice versa, you can do that by refinancing your mortgage.
4. To Tap Into Equity
If you’re suddenly met with credit card debt, medical debt, or other financial burdens, homeowners could tap into the equity in their home to pay for these expenses. For example, refinancing could result in a lower interest rate which, in turn, will lower your monthly costs.
Search online to learn about other ways refinancing can help you get cash.
Refinancing Options for Veterans
Veterans have options when it comes to refinancing their mortgage. There are two main options through the VA Home Loan program that can grant qualified homeowners with a refinanced mortgage.⁴
The first is VA Streamline (IRRRL) Refinance. This is aimed at people with existing VA loans who want to take advantage of savings and lower interest rates. It involves little paperwork and minimal out-of-pocket costs. Plus, borrowers can roll closing costs into their overall loan amount and complete the process without an appraisal.
The second option is a Cash-Out Refinance. This is an option for those with a VA or conventional loan. It’s ideal for people wanting to tap into their home’s equity. The money could be used towards home improvements, pay off debt, emergencies, or other financial situations requiring money.
Both of these pathways serve different purposes. Learn more about what each of these processes require and how to qualify by searching online.
Search Online to Learn More About Refinancing
Refinancing your mortgage could be worth it. Whether you’re looking to obtain a lower interest rate, lower your term, or switch to or from a fixed mortgage rate, it could be a smart financial decision. Keep in mind that refinancing costs three to six percent of the loan’s principal, according to Investopedia.
There are various ways a veteran could pursue mortgage refinancing. To be eligible for a VA Refinance, there are some criteria a person must meet:
- Must have served on active duty for more than 90 consecutive days during wartime or more than 181 days of service during peacetime.
- National Guard Members and Reservists must have served at least six years.
- Some surviving spouses of veterans who died in service or from service-connected disability.
- Must hold an existing VA Loan.
You can learn more about refinancing your mortgage as a veteran by searching online. Also, make sure you talk to a financial advisor to see if it could benefit you as a homeowner and research your options.