VA-eligible borrowers who rank lower interest rates and monthly payments as a priority may want to refinance with a VA-backed mortgage.
Are these your priorities for a VA refinance loan?
- I want a lower monthly payment
- I want to reduce my interest rate
A VA refinance loan can provide eligible borrowers up to 100% loan-to-value and the backing of the U.S. Department of Veterans Affairs. A VA refinance loan can also provide a lower interest rate and monthly payments if the conditions are right. Since the mortgage crisis in the fall of 2008, interest rates have steadily fallen to historic lows. As the economy stabilizes, interest rates may rise.
Active duty and retired military members who financed their homes when interest rates were higher may have a golden opportunity to get a lower rate and monthly payment with a VA refinance loan. Those who consider reducing interest rates and monthly payment as a priority may want to act now before interest rates go up.
Many borrowers are satisfied with their VA refinance results and the immediate lower payments and/or interest rates they can provide. But, for those looking for significant savings over time, it may make sense to perform a simple break-even calculation before moving forward with the refinance process. The break-even point occurs when the reduction in payment covers the cost of the refinancing. Refinancing costs may include origination fees, appraisals, the VA funding fee and closing costs. These costs are typically rolled into a VA loan. The “break-even” point tells the borrower how long he or she will need to hold the loan for the savings from the lower rate to begin to exceed the cost of refinancing.
A break-even calculation might look something like this:
- $6,000 (total costs to refinance) ÷ $300 (monthly savings) = 20 months to break even
Any homeowner who can justify savings through a break-even calculation might want to consider moving forward with a veterans’ refinance loan.
More information about the benefits of refinancing with a VA loan can be obtained by speaking with a seasoned VA mortgage professional.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender