Mortgage interest rates remain at historic lows this week. As reported from a weekly survey of 100+ lenders by Freddie Mac, the average mortgage interest dropped for two of three main loan types and ticked up for a third — 30-year fixed increased (2.66% to 2.67%), while 15-year fixed dropped (2.19% to 2.17%) as did 5/1 ARM (2.79% to 2.71%).
VA refinance rates are no different. In fact, when compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than for the average consumer.
Shop and compare your personalized rates with multiple lenders.
VA Refinance Rates 2020
Source: Ellie Mae Origination Insight Report, September 2020
When should you refinance?
In general, if you can save money over the life of your loan, then you should consider refinancing. Everyone’s financial situation is different, however, and refinancing can help you achieve a couple of different financial goals. Below are some of the most common reasons homeowners refinance:
- Lower your interest rate and monthly payment. Refinancing into a lower interest rate not only reduces the total interest costs you owe over the life of the loan, but it can reduce your monthly mortgage payment as well. This is the most common reason to refinance.
- Pay off your current non-VA home loan. VA home loans don’t require private mortgage insurance (PMI) like other loan types (FHA loans, for example, require PMI for the life of the loan if you put less than 10% down). You can also adjust your loan terms and interest rate type.
- Fund home projects or consolidate your debt. If you’ve earned enough equity in your home, then a cash-out refinance allows you to tap into that equity for cash. There are no restrictions on how you can use the money, so many homeowners use it to pay for home repairs or remodel projects as well consolidate debt.
What type of refinance should I choose?
There are two types of VA refinance loans: VA streamline refinance and VA cash-out refinance. Both have different benefits and loan processing requirements, so it’s important for homeowners to know what they want to accomplish with a refinance.
VA Streamline Refinance
Also known as an Interest Rate Reduction Refinance Loan (IRRRL), the VA streamline refinance is best if you want to lower your interest rate and monthly payment. In fact, your new monthly payment must be lower than your current one to be eligible for this loan. It has one of the easiest refinancing process — you don’t have to verify your income or credit score, and you don’t need a home appraisal.
VA Cash-out Refinance
The VA cash-out refinance loan is the only refinance option for taking out some or all of the earned equity in your home as cash. Qualifying for this loan is a longer process. You’ll need to meet similar requirements to when you purchased your existing home, including credit score and debt-to-income ratio requirements, plus a new home appraisal.
How do I get the best VA refinance rate?
According to research from the Consumer Financial Protection Bureau (CFPB), almost half of consumers don’t compare quotes when shopping for a home loan. This means many consumers are losing out on substantial savings. Comparing quotes from three to four lenders ensures that you’re getting the lowest refinance rate for you. Some lenders may even waive certain fees and closing costs.
Interest rates determine what you’ll pay monthly as well as the total interest amount over the life of the loan. Even a half a percentage point decrease can mean a savings of thousands of dollars you’ll owe overall.