The qualifying veterans and member of US Armed Forces has option to get mortgages and refinances backed by the United States Department of Veterans Affairs (VA). The VA guarantee also makes it easier for the veteran borrowers to buy or refinance residential properties by availing a number of benefits. Along with lower interest rate and zero down payments, a VA loan can also be obtained by a borrower without going through the regular credit checks and property appraisal.
The VA further allows the veteran borrower to pay interest at a reduced rate by refinancing the loan under VA streamline refinance program. The VA streamline refinance is often regarded as an prime rate Reduction Refinancing Loan (IRRRL). The program helps borrowers to switch from their existing VA loans to another mortgage loan without any change in the loan amount. However, each borrower must understand some of the most important aspects of the distinct refinance system.
Reduced Interest Rate:
The ongoing fluctuations in the market lending rate make it a daunting challenge for the borrowers to decide the right time to get a home loan. Many people even wait for the interest rate to fall to negotiate with the lender. But the VA streamline refinance allows veteran borrowers to purchase or refinance a residential property without paying a high interest rate. Whenever the market percentage rate falls, they can refinance the existing VA loan to avail several benefits.
Reduced Refinancing Cost:
While refinancing a conventional loan product, the borrowers are required to incur additional expenses. Normally, a borrower has to pay about to 3% to 6% of the loan amount as refinancing cost. But the refinancing cost is reduced dramatically, when a veteran borrower streamline his existing VA loan.
When a borrower applies for a conventional home loan, he has to comply with the requirements related to documentation and paperwork. But a veteran borrower can avoid the lengthy loan processing while applying for a VA loan. The VA guarantee further makes it easier for him to refinance an existing VA loan by avoiding the paperwork and documentation. The absence of paperwork makes it easier for you to pay lower prime rate by refinancing the loan within a short span of time.
Change in Type of Interest:
Normally, a mortgage loan can be obtained either at fixed borrowing rate or variable rate of interest. When you decide to refinance you existing VA mortgage loan under the IRRRL program, you have option to opt for the fixed as well as variable lending rate. If your current bank rate exceeds the prevailing market interest rates by at least one full percentage point, you can save money by refinancing your existing VA home loan.