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Benefits of refinancing to a Veterans Administration loan

Veterans Administration (VA) mortgages are among the primary perks of military service, and the benefits don't stop when it's time to refinance.

Because repayment is guaranteed by the VA, you can refinance up to 100% of the value of your home without paying mortgage insurance. That is a huge advantage over conventional lending, which typically requires you to hold at least some equity in your house, and requires costly mortgage insurance if your equity is less than 20%.

The VA provides the following main types of refinancing loans, each with its own eligibility requirements.

Interest Rate Reduction Refinancing Loans (IRRRL)

Veterans who already have a VA mortgage can refinance up to 100% of their home's value with an IRRRL, typically at a lower interest rate. These loans come with very low fees that can be wrapped into the loan. And the VA requires no extensive credit checks or property appraisals, although individual lenders may have stricter requirements. An IRRRL loan is limited to refinancing first mortgages only. If you have a second loan on your house, you will need to discuss your options with a mortgage professional.

Cash out

Intended for homeowners who currently have a VA loan along with some equity and/or a second mortgage, a VA cash-out refinance will generally let you borrow enough to pay off your existing mortgage and take some cash out as well. VA rules allow cash-out loans up to 100% of a home's value; however, lenders' rules may vary. The fees on VA cash-out loans are also higher than the fees on IRRRLs.

Conventional to VA conversions

If you currently have a conventional mortgage, you might be able to refinance into a VA loan with all of the advantages that can bring. As with standard VA loans, VA refinances are available to active-duty military, veterans, reservists and National Guard members, along with the spouses of military members who have died on active duty or from a service-connected disability. The fees on VA conversion loans are generally the same as fees on cash-outs, and the chief advantage is the same: You can typically borrow up to 100% of your home's value with no mortgage insurance fees required.

The US Department of Veterans Affairs (opens in a new tab) provides detailed information on benefits, eligibility and how to apply.

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Related topics

When should I refinance?

Make sure you're refinancing at the best possible time by asking yourself a few questions.

3 reasons to refinance

Consider interest rates, mortgage options, and your personal plans when deciding to refinance.

Will I benefit from refinancing?

Weigh the benefits versus the costs and see if refinancing is right for you.

What is cash-out refinancing?

Learn about the refinancing option that allows you to take the difference between your old and new mortgage in cash.

For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 4.199% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 360 equal payments of $969.30. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.378% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result 180 equal payments of $1,405.34. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 3-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.101% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 36 equal payments of $926.23 and 324 equal payments of $965.82. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 5-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.052% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 60 equal payments of $926.23 and 300 equal payments of $963.40. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates&mdash that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 7-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.020% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 84 equal payments of $926.23 and 276 equal payments of $960.90. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 10-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.110% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 120 equal payments of $954.83 and 240 equal payments of $965.24. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

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