VA LOAN REFINANCING (BEST OPTION)

[JaeT.21]

Hello, I'm wanting to refinance my VA loan, since my credit score has gone up.  I get tons of junk mail about it. I just want to know who's legitimate, please. This is my first home and first year of my VA loan.

 

Thank You,

Jason.

[broncovet]

It would require many more details for us to advise you.  However, some general principals apply:

1.  If you dont plan on staying in your home "At least" the next 4 or 5 years, you are probably better off staying where you are at because the costs of refinancing your loan "takes time to be recovered" with a lower payment.  

2.  It makes a huge difference what interest rate you are paying now.    Most of the time, you dont want to refinance "unless" your new interest rate is about 2 percent lower.  So, if your old rate is 5% and you can get 3%, its probably worth it provided that you stay in your home for 5 years or more.  

3.  It also makes a huge difference in "how much it costs to refinance".  Do not "buy into" their statements that its free.  It isnt.  If the company charges 2000 to refinance, this means your principal balance goes "up" 2000 dollars.  So, if you saved 100 dollars each month, with a lower payment, then it would take 20 months to break even.  BUT WAIT!!!  That sounds good, but its not so.  

Example:  

     You owe 100,000 (I like round numbers).  Your interest rate is 6 percent but you have been paying on that loan for 10 years.  You only have 20 more years to go and it will be paid off.  Again, lets say it costs 2000 to refinance, and your new principal you owe is 102,000.  Again, lets say your payment goes down 100 per month.  So, you break even after 20 months right?  Wrong!!  After 20 months YOU STILL OWE and have to pay 28 more years, and if you kept your old loan, you would only need to keep paying 18 more years, so you wind up paying payments for 10 more years!!!

      Dont forget that!!  (Someone "selling" you a loan often forgets to tell you that, even tho you save 100 per month, you pay for 10 more years!  That is not a good deal!

     If you have 20 years to go, and have lived in your home, figure the cost refinancing it for 20 years..not the 30 years that sounds like a lower payment.  

      You really have to analyze it carefully, and fortunately Im a math nerd and can figure it out, but I cant crunch numbers when I dont have any numbers to crunch!

       I know you want a simple answer, but its a complex problem and it takes a more thought out answer.  

      

[JaeT.21]

Thanks, I just wanted to get a lower interest rate. I'm less than a year into my loan. I'll keep researching.

 

[broncovet]

If you lived there only a year, then its unlikely it makes sense to refinance, "unless" your current interest rate is over 4 percent.  If a new loan is only a half percent, or 1 percent less, then it probably wont make sense to refinance  now.   

Any savings you would have would likely be absorbed by the costs of refinancing.  But, dont take my word for it, put a pencil to the numbers.  You may have special circumstances where this makes sense.  

I refinanced my truck last year.  Basically I got a bunch of incentives only available if I financed through GM.  So, I got my incentives and refinanced through my credit union at a lower rate, and it cost almost nothing to refinance (under 50 dollars or so). 

      

Edited March 18, 2021 by broncovet (see edit history)

[Buck52]

We were in this same situation a few years ago  we finance at 5.5%   back when the interest rates were up  obviously...we refinance with a better interest rate about 12/13 years ago.

They do have a restriction Claus on refinancing   I think you need to have at least lived in your home a year before they will let you refinance  depending on your lender& VA if you have a VA lOAN?

So  with the Interest rates down right now  and if you can get at least a 2.25% loan  (depending on credit score) I'd sure do it...it will cost you but maybe just what you have paid in principle  for the year you live there  they tie the finance cost on the back of the loan   so you shouldn't have any out of pocket cost.

We sold our home June 9th 2020   and it took us a while to find another house  because Interest rates were so low Eveybody started selling their homes and  getting bigger more expensive homes  due to the low interest rate ,  this caused us a while to find a home because getting into a bidding war to buy a house is not good   we always got out bidding   so this is why it took us a while to find another home.

We just purchase a home Dec 9th  2020 and we got 2.25% Interest rate.  and were fine with the payments.

Interest rates may not get to much lower than they are now  and they can rise overnight.  so if you can lower your interest rate and lower your house payments   I say hell yeah.

later on you can always pay  1/2 a payment two times a month  or have your payments taken out  paying on your loan every 2 weeks  or say 3 times a month  breaking up the full payment,   you can get your equity built up a lot faster because your paying mostly on the principle....you can also do this on a auto loan   the more you pay on the principle the faster the Interest rate goes down  on a long term loan  like 48 months or longer.

Edited March 18, 2021 by Buck52 (see edit history)

[JaeT.21]

55 minutes ago, Buck52 said:

We were in this same situation a few years ago  we finance at 5.5%   back when the interest rates were up  obviously...we refinance with a better interest rate about 12/13 years ago.

They do have a restriction Claus on refinancing   I think you need to have at least lived in your home a year before they will let you refinance  depending on your lender& VA if you have a VA lOAN?

So  with the Interest rates down right now  and if you can get at least a 2.25% loan  (depending on credit score) I'd sure do it...it will cost you but maybe just what you have paid in principle  for the year you live there  they tie the finance cost on the back of the loan   so you shouldn't have any out of pocket cost.

We sold our home June 9th 2020   and it took us a while to find another house  because Interest rates were so low Eveybody started selling their homes and  getting bigger more expensive homes  due to the low interest rate ,  this caused us a while to find a home because getting into a bidding war to buy a house is not good   we always got out bidding   so this is why it took us a while to find another home.

We just purchase a home Dec 9th  2020 and we got 2.25% Interest rate.  and were fine with the payments.

Interest rates may not get to much lower than they are now  and they can rise overnight.  so if you can lower your interest rate and lower your house payments   I say hell yeah.

later on you can always pay  1/2 a payment two times a month  or have your payments taken out  paying on your loan every 2 weeks  or say 3 times a month  breaking up the full payment,   you can get your equity built up a lot faster because your paying mostly on the principle....you can also do this on a auto loan   the more you pay on the principle the faster the Interest rate goes down  on a long term loan  like 48 months or longer.

Thanks for that. Yes, If we can get a 2.5 or less, that would be great. I think I'll wait a little longer. I want to have the best credit to get the lowest rate. If I get the lower rate, I'll use the difference in mortgage payments to pay off my car. After that, we'll take all that money and pay extra for 6 months and use the other 6 months worth for improvements or savings.