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SOCALVAHOMES

Chapter 24:

Easily Exchangeable Loans – The VA Streamline Refinance

When Should You Refinance Your VA Home Loan? The Tremendous Advantages of a VA “IRRRL”

Advertisements for VA loans are everywhere.  You hear radio ads, TV commercials, and if you have a VA loan already, your mailbox gets filled every week with solicitations. If rates click down just a notch, there’s a massive pile of mail screaming for your attention!  Is this stuff for real?  There’s just an avalanche of it with bold claims of “lower rates.”  Why does it seem as if having a VA loan makes you a target for solicitors?  Where do these people who call you get your number from?    Should you respond to any of these offers?

Refinancing, by definition, is simply replacing old financing with new financing (a new mortgage) because the new terms are more favorable to you.  In the money game, it’s the ultimate do-over, a second (or third or fourth…) chance to take advantage of a new opportunity.   Homeowners with VA home loans consider refinancing for a variety of reasons, including to obtain a better interest rate, to reduce monthly payments, to consolidate debts by paying off credit cards, or to free-up cash, often for home improvements.  There are four reasons to refinance:

  • You have a fixed rate and lower rates are now available (e.g., if you have a 5% loan and 4% is now available). Such a “refi” is considered a fixed rate to fixed rate.
  • If you have an adjustable loan and want the security of a fixed rate loan. Often in this case, people were enticed by the really low start rate that was offered, and now they want to go back to a fixed rate.
  • Some people have a fixed rate but want the lower payments that are available on an adjustable loan. Such a refi is called a fixed to adjustable.
  • If someone wants a VA cash out refinance, typically where the homeowner’s property has appreciated (e.g., the property was purchased for 400K three years ago and the property values went up 25% so now it is worth 500K), and you want to take out funds for home improvements, debt consolidation or other reasons. (See Chapter 22: The Cash-Out VA Refinance vs. An Equity Line for in-depth detail on financing options.)

Homeowners who purchase a home using their VA Home Loan Benefit often don’t understand the compelling reasons to refinance.  They may be skeptical of all the solicitations.  Or they may have had a bad experience getting their purchase loan.  Or they maintain a stubborn stance because they simply don’t want to “start all over again” with a new loan because their goal is to pay off the debt, pure and simple.  This is the biggest mistake.  There are a host of reasons creating resistance when it comes to refinancing and preventing our men and women who serve from taking advantage of a bona fide, legitimate opportunity to achieve better terms on a new loan.  This is especially true as it pertains to a “fixed rate to fixed rate” refinance.

It’s very common for a buyer to purchase a property with a fixed rate and then come up with a list of objections as to why they will not refinance to a lower rate.  Unfortunately, many of these objections are “self-invented myths” that prevent our VA borrowers from improving their financial situation.  Often the improvements can be life changing with respect to properly managing their finances.

This situation is very familiar to us at So Cal VA Homes.  We have tracked the data and seen the evidence.  There exists a group of about 5000 home owners with VA loans across the state of California who bought their homes between 2007 and July of 2011.  This specific group of VA borrowers all have the same original financing.  They still have the same purchase loan that helped them buy the house.  During that time, 30 year fixed rates averaged about 5.50%.  Since that time frame, rates dropped to as low as 3.00%.  For the years between 2011 – 2015, “no points, no fees” refinance opportunities existed at 3.75%.  There has been more than enough opportunities for at least some of those 5000 VA borrowers to take advantage of lower rates, yet they don’t.  We’re certain it’s not a matter of these homeowners qualifying to get approved for a better loan.  They just are not taking action.  These home owners with VA loans could truly benefit from a new loan with a much lower rate, without raising their loan balance or incurring any closing costs. The opportunity is actually far MORE compelling than just a lower rate achieved without incurring any costs at all.   And yet, over the years, this is what we hear from clients when they initially call:

  • “It’s too much of a hassle.”
  • “I’ll have to write a check up front or at closing.”
  • “I disliked my previous loan office/mortgage company.”
  • “My grandfather told me the rate needs to be at least 2% lower.”
  • “I don’t understand or trust the process, and I’m skeptical of all the solicitors.”
  • “I find the whole thing intimidating.”
  • “It’s too much paperwork.”
  • “It costs too much.”
  • “My transaction costs were $10,000 – there’s no way I’m paying that again.”
  • “My loan balance goes up.”
  • “I need equity, or my house is ‘upside down.’ I owe more than it’s worth.”
  • “I’m retired and won’t qualify.” “I changed jobs.” “I’m self-employed.”
  • “I don’t want my property taxes to go up.”
  • “I need an attorney to review all the papers, and I can’t afford one.”
  • “My credit’s not good enough.”

As Seen on ABC 10 5:00 O’Clock News

ABC 10 News

Watch what our clients are saying about us

Sgt. Will Bauer (U.S.M.C.), Foothill Ranch, CA

As Seen On ABC 10 News

U.S. Army Veteran Billy Mayberry and Debbie Mayberry, Quartz Hill, CA

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