Do you want to take advantage of lower interest rates? Or maybe there’s some merit to changing your mortgage’s term. Perhaps you’d like to take advantage of either benefit but haven’t done it yet because you owe more on your home than it’s worth. Maybe Earl can help.
No, I’m not rebooting an NBC show about the benefits of good karma. I’m talking about a loan option from the VA called the interest rate reduction refinance loan (IRRRL). You might also see this referred to as an “Earl” (because the acronym IRRRL is pronounced the same way) or as a VA Streamline. No matter what you call it, the positives are huge.
Reduced Funding Fee IRRRL
One great benefit of any VA loan is that you don’t have to pay for mortgage insurance. Instead, you just pay a flat funding fee that can either be paid at closing or rolled into the cost of the loan.
When you refinance with an IRRRL, you pay a reduced funding fee that’s just 0.5% of the loan amount. This saves you a lot of money on your refinance.
This option also offers some additional perks that aren’t necessarily available from other loan programs. Most of the time when you refinance, you have to have a minimum amount of equity in your home before you can take advantage of lower rates.
That’s fine if your home has gone up in value since you bought it. But unfortunately, many areas are still recovering from the last market downturn. They may have felt left out in the cold as rates dropped.
If you’re in that boat, we have some good news. Veterans, active-duty service members and surviving spouses who qualify for VA loans can refinance up to 120% of their home’s value. This means that if you owe $100,000 on a home that’s only worth $80,000, you can still refinance to change your term or lower your rate.
If you decide to go with an IRRRL, you may not need an appraisal. But if you do, it’s a little easier because the appraiser can do a drive-by appraisal on these loans. You don’t even have to be home for the appraiser to take some pictures of your property and evaluate its worth.
Not only does this make the whole process faster and more convenient for clients, it also helps reduce the cost of the loan because you won’t be paying as much for the appraisal. Unlike many VA loans, IRRRLS don’t require a pest inspection unless the appraiser thinks there’s a problem.
Rates have picked up a little bit lately, but if you haven’t thought about refinancing in a while, note that rates are still near historic lows. If you’ve hesitated due to a lack of equity, an IRRRL might help you lock in a lower rate before rates go up. No one knows exactly when the Federal Reserve will raise rates, but the indications are that it might be sooner rather than later.
If you think refinancing your VA loan might make sense for you, right now may just be the best time to move ahead. You can get started online, or call (888) 728-4702 to get in touch with one of our Home Loan Experts.
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