You want to refinance and take advantage of the current low rate environment, but you don’t want to get rid of your home equity line of credit (HELOC) or other secondary financing. You have an option when it comes to VA loans.
If you’re active duty military, a veteran or a surviving spouse who qualifies for a VA loan, you can refinance your primary mortgage without having to jump through hoops to pay off any subordinate financing you have on your house.
Quicken Loans VA Product Manager Geno Yoscovits discussed how this is a real win for clients.
“Clients sometimes have legitimate reasons for wanting to keep secondary financing in place during a refinance,” he said. “They often get favorable terms on a home equity line that they can use for a variety of purposes. VA loans remove the requirement to pay off a secondary lien.
Other clients benefit as well. Many cities and employers offer assistance in the home buying process as an encouragement to live in a specific place or as an employment perk. Many of these programs are structured to let people take advantage of forgivable loans.
Let’s say you accept a new job that offers $15,000 toward a down payment on the purchase of your new house if you stay with the company for four years. The assistance is given in the form of a forgivable loan that you don’t have to pay back unless you leave the company before the four years is up. Sounds great, right?
Now imagine you’re trying to refinance your house to take advantage of the low interest rates out right now. Many loan options require pay off on the forgivable loan that’s a lien on your house before you can refinance your primary loan. On VA loans, you can keep that secondary financing in place.
If you have secondary financing solely for the purpose of utilizing your equity, it’s worth noting that you can do a primary mortgage for up to the total value of your home. This could help you get a lower rate than you otherwise might with a second mortgage or HELOC.
This represents the removal of a significant barrier to refinancing for clients, but it’s just one of several great things about the VA loan program.
If you’re looking at a VA loan, you can get started here. If you still have questions, let us know in the comments below.
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