A recent story from someone interested in a VA streamline refinance:
My boyfriend and I bought a house two years ago. Although we were cautious about our purchase and careful not to reach past our financial limitations, making our mortgage payments was still getting to be a strain. Fortunately, my man did a stretch in the Air Force a few years before we started going. That made us eligible for VA Streamline refinancing, and that means we were able to restructure our mortgage to fit our current situation.
Now, this obviously isn’t an option for every homeowner out there. Only veterans are qualified to take loans guaranteed by the VA, and the same limitation applies to VA Streamline refinancing. If you or your spouse (or significant other) is a veteran, though, this mortgage alteration is a possibility. This kind of refinancing is also sometimes called “ IRRRL Refinance.” Technically, that only applies if you’re moving money from one VA loan to another, but IRRRL and Streamline work the same way. You do have to pay a funding fee to move from a non-VA to a VA loan, but it’s often worth it.
One of the best features of VA Streamline refinancing is that closing costs get rolled up along with the principal. That means this type of refinancing comes with minimal out-of-pocket costs. If you’re in the sort of situation my boyfriend and I were facing – an optimistic financial outlook but a shortage of cash-on-hand – this little set-up can be a real lifesaver!
Like most refinancing options, a VA package allows you to pick a term and rate set-up that suits your needs. Like most mortgages available today, you can get VA financing in 30-year, 15-year, and ARM (adjustable rate mortgage) varieties. A 30-year loan is the best way to get guaranteed low rates and a low monthly payment; a 15-year package will trade higher payments for less overall interest. An ARM is a little more risky, since (as the name suggests) your interest rate can change over the term of the loan. If you need to absolutely minimize your monthly payments, though, an ARM is often the way to go.
Although the VA Streamline program is, like many VA offers, a pretty sweet deal for veterans, it does have a few limitations. You have to establish a decent payment history on your current mortgage: No late payments for the past year at least. You can’t take any of the new mortgage in the form of cash, either. This was a shame for me and my boyfriend, but we got over it. (Also, we found out there is one exception: You can pull up to $6,000 in cash out of your new mortgage to use for energy-efficient home improvements.)
When your financial situation changes and your mortgage no longer suits your needs, refinancing is often an excellent idea. If you have a veteran in the family, it’s just plain foolish to overlook the VA Streamline program for refinancing. Don’t make any refinancing commitments until you check it out.