Let’s talk about mortgage refinance.
Hi, it’s Dave Holland with Veterans National Mortgage.
And if it’s worth it for you financially, for VA and FHA, they have what’s called a streamline loan. The streamline is exactly what it sounds like, there’s a reduced amount of paperwork that you have to submit to the lender, generally, you do not have to send them income documents, you don’t have to send them taxes, you don’t have to send them pay stubs, those type of documents, on a just an interest rate reduction alone.
That is you, you don’t have to send the employment information, taxes, income, anything like that, but it is strictly there so that you can lower your interest rate. In order to qualify for the VA interest rate reduction loan, you still have to be employed or have that source of income that you had in the beginning. But you don’t have to prove that income.
This loan is outstanding, as far as the cost, because there is not very much cost associated with it either. Typically your VA funding fee if you had a VA funding fee, in the beginning on your purchase, that is reduced to a half-point 5% for the VA streamline refinance. Other loan types have that as well. FHA, you can do the same thing, streamline and not show that income information for the different types of refinance, you can also do a cash-out refinance.
“You can refinance to lower your interest rate, you can refinance to get cash out, depends on what your goals are. ”
A cash-out for VA specifically, is two-part, there’s a cash-out that you can get money back. But also for VA loans only there’s a cash-out mortgage refinance for VA, that is not cashed out. But that means that you came from any type of loan, other than the VA.
So if you go from a conventional loan to VA, or an FHA loan to a VA loan, that is considered for VA purposes, a cash-out. It doesn’t mean you’re getting cash out, it’s just not a streamline. Streamline is only going from VA to VA or FHA to FHA.
The other type of loan that you could do, obviously for a mortgage refinance is cashed out. So cash out is you’re taking equity out of your home and increasing your loan amount so that you can get cash back to do home improvements, to go on a yacht trip, whatever you want to do.
You can get cash out to your home, up to a certain amount. Depending on the loan type, you can get up to a certain amount to do those various things. So for VA loans, you can get cash out up to 90%. So that means that up to 90% value, you can get that cash amount for the VA loan, with FHA, conventional, those all differ as far as how much you can pull out of your home, in equity or loan amount for all of the loans that are available there.
When you do a cash-out refinance, you do need to have full documentation meaning you have to have income and assets, you know, your job, employment, everything like that. The next question for cash out is, do I do a cash-out? Should I use it to pay off debt? That question really depends on your financial situation. So if you take cash out and you know, you were able to lower your payments.
“For VA loans, you can get cash out up to 90%. So that means that up to 90% value, you can get that cash amount for the VA loan, with FHA, conventional, those all differ as far as how much you can pull out of your home, in equity or loan amount for all of the loans that are available there. ”
Let’s say you have $1,000 a month outgoing in payments and car credit cards, you know, long-term loans of some sort, or maybe student loans, things of that nature. And that $1,000 a month has a higher interest rate than your home, then it may be worth it to you. Some people will argue the fact that you’re adding to your loan amount for your home and it’s going out for 30 years.
If you’re able to pay off that amount in the same timeframe, or you can pay extra to lower the timeframe that you added to your loan, then maybe it’s worth it for you. Plus, you are lowering $1,000 a month on interest that’s maybe 12% 14% versus your home loan, which as of today is two and a half percent or 2.75%.
So that difference will allow you to hey, you know, maybe you can pay 800 or 700 per month, and pay that amount down a lot faster than you would be able to. If you’re making you know, 16% interest payments, a lot of people will ask as well, should I pay points, or are points worth it for me for a refinance?
Again, that really depends on your particular scenario. But let’s take an example. Let’s say you have a loan that you can get 3.1 to 5% on with no points, or you can get 2.25% with 1% in points. So that means that you’re going to pay 1% to lower the interest rate down to 2.25%. versus just taking no points out 3.125%. For this example, I use $600,000. So for $600,000, the difference between no points and points: no points is $3677 a month, including taxes and insurance; and points is $3370 a month, including taxes and insurance. If you look at the two payments, that’s a $307 difference between the two payments.
“Some people will argue the fact that you’re adding to your loan amount for your home and it’s going out for 30 years. ”
So not including all of the other closing costs or other costs that are incurred with the loan, you’re looking at 1% equates to approximately $6,000. Saving $307 a month means that it’s going to take you 19 months to pay off the difference between those two. After 19 months, you break even. So for most people, if you are going to stay in your house for more than a year and a half, it makes sense for you to take 2.25%. If you’re moving or you’re not sure if you’re gonna stay in your house for longer than that, or if the other closing costs equate more equate to more than what that 19 months is, maybe it’s not worth it for you. So you really have to take a look at the whole scenario.
Let the loan officer know hey, this is what I’m looking at. Your loan officer should be able to tell you this is what points would cost, this is with no points. They should not just send you a disclosure that has points included because it’s not always worth it. You have to know what you want, do you want the lower payments, do you want less closing costs, what is going to benefit you the most?
In looking at that scenario, if you take 19 months, that’s a pretty good payoff. So usually just going off of VA loans, they want you to break even in under 36 months. That’s a good deal in their eyes. So if you’re at 19 months, and the VA once you hit 36 months, probably a pretty good deal. The actual cost of a mortgage refinance these days is probably about 2500. So you have to add that to whatever you’re looking at in points or payments, to see if it makes sense for you.
“For most people, if you are going to stay in your house for more than a year and a half, it makes sense for you to take 2.25%.”
So now you know a little bit more about mortgage refinance and maybe have an idea of whether you should do a refinance, pay points or not pay points.
If you would like more information, go to our website.
We can give you a free interest rate quote, or pre-qualification with no effect on your credit.
We can even tell you if it’s worth it for you to refinance or not, with no obligation.
I hope that helped. Now for more information, please go to our website at veteransnationalmortgage.com click apply now, for a free interest rate, quote, and pre-qualification that does not affect your credit (pre-qualification with no credit pool).
Or you can call us directly at (888) 922-2022
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