VA Refinance Rates

If you are looking to refinance your VA mortgage, the best thing you can do is shop around to find the best deal for you. The type of refinancing you need, the interest rates and loan terms will all be things to consider when researching lenders. The best option for you will depend on your circumstances and the lender’s policies. With so many things to consider, it’s important to understand how to find the best VA mortgage refinance deal for you.

The 4 best VA refinance lenders of 2020

Loan Terms Lowest APR Key benefit
Bank of America 15 to 30 years (3.392%) 3.024% Affordable, transparent rates
Navy Federal 15 to 30 years (3.875%) 2.125% Fast service
Veterans First Mortgage Not listed Not listed Plenty of loan options and services
Quicken Loans Not listed Not listed Rated highly for customer service

The 4 best VA refinance loans of 2020

1. Bank of America: Most overall affordable

Bank of America is a trusted name that provides plenty of different refinancing options for VA loans. There is a choice of fixed-rate, adjustable-rate and cash-out refinancing options. Overall, Bank of America offers some of the most affordable rates available and is transparent in those rates, which is great when comparing multiple lenders. Applying for a Bank of America mortgage is designed to be as simple as possible through an online application system. The Digital Mortgage Experience that Bank of America offers allows you to prequalify to get an estimate on refinancing rates before you apply. If you are already a Bank of America customer, you may even be entitled to a discount on the closing fees.

2. Navy Federal Credit Union: Best VA customer service

Navy Federal Credit Union is the largest credit union in the U.S. and it offers great rates for loans. Navy Federal offers a variety of refinancing options to help you either get a better loan rate, take cash out from your home equity or convert to a fixed rate. Navy Federal aims to act fast when it comes to finalizing a refinance, and usually closes the mortgage within 30 to 45 days once all the paperwork has been submitted. With Navy Federal loans, you typically won’t have to pay for closing costs upfront, as these can be added to the total loan amount. This makes Navy Federal a great choice for those looking for flexibility when refinancing.

3. Veterans First Mortgage: Best for loan offerings

Backed by the U.S. Department of Veterans Affairs, Veterans First Mortgage is a name you can trust. With Veterans First mortgages, you can take out a refinance agreement for up to 90% of your loan-to-value. Veterans First Mortgage gives you options to refinance for a shorter loan term, save money on interest rates with an IRRRL, switch from a variable to fixed-rate, take cash out and even get help with debt consolidation. With so many options, Veterans First Mortgages are a great option for many looking for VA mortgage refinance loans.

4. Quicken Loans: Best at protecting credit

Another lender that can help you refinance your mortgage is Quicken Loans. Quicken Loans has been voted the highest in customer satisfaction in the U.S. for 10 consecutive years by J.D. Power. With a stellar record in customer service, they are a great option to research. Quicken Loans provide plenty of refinancing options and allow you to shorten the term of your loan, take cash out or change your mortgage terms. Applying for a mortgage or refinance with Quicken Loans is designed to be easy. Any paperwork and initial applications you complete can all be done online to help you save time.

What is a VA refinance loan?

If you currently have a VA-backed home loan, you may want to refinance your mortgage at some point. A VA refinance loan is a way of changing or switching to a new VA loan agreement. It works just like a regular refinance would, but you’re acquiring a new VA loan, not a conventional or FHA loan. There are a few reasons why you might want to do this. You could get a better rate or tap into your home’s equity to free up some cash. Alternatively, if you have a conventional mortgage, you could switch to a VA loan agreement during your refinance.

[Read: Best VA Loans of 2020]

With any refinancing agreement, you need to think carefully about the type of loan you need, interest rates and the provider you refinance with.

VA refinance loan types

There are two main types of VA refinance loans to know about. Deciding which one is right for you will depend on your overall goal of refinancing.

  • VA streamline refinance: A streamline refinance loan is best for those who wish to get a lower rate of interest on their mortgage. This is also known as an Interest Rate Reduction Refinance Loan (IRRRL). In most cases, streamline refinances are easier to complete. They don’t require a new appraisal or some of the other steps that are required during the typical loan process. It’s also for those who wish to switch from an adjustable- to a fixed-rate mortgage. To get a VA streamline refinance loan, you must already have a VA mortgage, and you will need to apply for a refinance loan with a rate that is lower than your current one.
  • VA cash-out refinance loan: A VA cash-out refinance loan is a refinancing agreement that is best suited to those who wish to unlock some of their home’s equity rather than get a better rate. If you have been paying off your mortgage for a few years and have built up a good level of equity, you can tap into that equity to receive cash. Generally, with this type of refinancing, you will need to pay closing costs upfront and won’t be able to include them in the value of your loan.

VA refinance fees

With any type of refinancing, there are refinance fees to pay. That’s because you are essentially taking out another mortgage. This means you will be expected to pay whatever closing fees your loan provider charges along with a VA funding fee. The VA funding fee is a one-time payment that you pay on a VA loan, which is something you will had to pay when you first took out the loan as well. With a refinance, this fee will be due again as it’s a new agreement. The funding fee depends on the type of refinance you want to do. For IRRRLs, it’s a 0.5% funding fee. For cash-out refinance, it’s 2.3% if it’s your first refinance or 3.6% if it’s not your first refinance. You won’t have to pay the funding fee if you’re receiving compensation, have a disability or you have a Purple Heart award.

[More: VA Loan Funding Fees, Explained]

How to refinance a VA loan

  • Choose the type of refinance: You will first need to choose which type of refinance you want. Do you want cash for equity? Then you’ll need a cash-out refinance loan. Want to save money? An IRRRL refinance will be best for you.
  • Research different loan providers: Take some time to look at all your options and compare interest rates, closing costs and other terms before you agree to one.
  • Lock your rate: Once you have chosen a lender, the next step is to lock in your rate in case rates increase later. Mortgage rates can fluctuate, so you will want to lock a low rate as soon as you can.
  • Submit documents: When you are ready to move forward with your refinance agreement, you will need to submit your documents, which will then be reviewed by an underwriting team.
  • Final approval: The last step is to get final approval and pay your closing fees at your loan closing.

VA loan refinance eligibility

To qualify for a VA refinance you must meet certain requirements. You must be an active duty service member, an honorably discharged veteran or a spouse of a service member. Aside from those basic requirements, you should also consider:

  • Credit score: Your credit score and income will be a big part of your eligibility. Each lender will have their requirements so you will need to do some research.
  • Debt-to-income ratio: You will need to have a relatively low debt-to-income ratio to be eligible for a refinance. Each lender will have different requirements, but most lenders will ask for below 50%.
  • Individual lender requirements: Certain lenders may have their eligibility criteria you must meet before approving you for a refinance loan. While researching different lenders, take a look at their full list of eligibility criteria.

Advantages when refinancing a VA loan

Refinancing a loan may be the best option for you if you are either looking to save money or looking to receive money from your home’s equity. There are a number of advantages to refinancing a loan, including:

  • Saving money on interest each month with a better rate
  • More predictable costs if you switch to a fixed-rate loan
  • The potential for a shorter loan term to build equity faster
  • Disadvantages when refinancing a VA loan

While refinancing can be a great move for some homeowners, it’s not for everyone. There are some downsides to refinancing. For example, refinancing can help you access cash with a cash-out refinance, but this also extends your loan term and costs more in interest overall. Some of the disadvantages of refinancing a loan include:

  • Additional costs, including closing costs and the VA funding fee
  • An extended mortgage term if you take out cash on your equity
  • An increase in monthly costs if switching from a fixed- to a variable-rate loan

How should I choose the right refinance loan?

  • Know the type of loan you want. The first step to finding the right refinance loan is to narrow down your focus to the type of refinance you need. If you are looking for lower interest rates, you should focus on IRRRL refinancing. If you are looking to take out cash, you will need a cash-out refinance instead. Knowing which type of loan you need will help you narrow down what to look for with each provider. For example, when looking for IRRRL financing, you will want to prioritize low interest rates in your search.
  • Compare interest rates. Searching for the lowest interest rates is a good idea, no matter what type of refinancing you want. Different providers will offer different rates depending on your credit score, so you will need to research and try to improve your score where possible.
  • Choose between a variable-rate loan or fixed-rate loan When researching interest rates, it’s worth looking at both variable- and fixed-rate refinance loans. You may choose to switch from one type to the other while refinancing.
  • Check eligibility Another thing to look for in your search for the best VA refinance loan is the eligibility criteria of each lender. The interest rates and other terms may look great at first glance, but you will also need to check you meet the eligibility criteria before applying.

Too long, didn’t read?

Refinancing your mortgage can sound complicated, but with some research, it’s just a case of narrowing down your options. Getting a good picture of your credit score, needs and financial position with your current mortgage are great ways to start your search. The best things to look out for are different loan terms, interest rates, refinancing types and eligibility criteria. Once you’ve found a lender that ticks all the boxes, make sure you lock your rate to take advantage of the current low-interest rates being offered.

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