Recently there has been some veteran refinance information issued by the Department of Veterans Affairs and the Consumer Financial Protection Bureau (CFPB) issued a warning to every eligible veteran. The warning was about certain solicitations about refinances that are directed towards veterans.
It was sent out via email and it advised veterans that when solicitations for refinances are sent their way, whether it be through the mail, the internet, or telecommunications, there are four questions you should ask yourself in order to fully understand the ramifications of refinancing your VA loan.
Low VA Rates is a company that caters to veterans specifically. We want to educate our customers about our services. We agree with the Department of Veterans Affairs and the CFPB that veterans should be educated and know what they’re doing when they go to refinance their mortgage.
In this post, we will go over the four questions that were presented in the email that was sent out.
Does a Lower Interest Rate Extend the Term?
Yes. It almost always does. The majority of the time whether you’re a civilian or a veteran doing a FHA, USDA, or conventional refinance the term almost always goes back to a 30-year term.
For example, if you’re three years into a 30-year mortgage, meaning you have 27 years left, and you refinance, you’re going to extend the term of your loan. This is a normal scenario when it comes to refinancing.
However, this can be avoided at Low VA Rates. We can do “odd-term” loans like 27.5-year or 28-year terms. So if you’ve been in your mortgage for two years and you want to lower your rate on a refinance but you’re concerned about extending the term, you can request a shortened one.
We just want to make sure you know your term and that a refinance normally increases.
What Are the Final Implications When Choosing between a Fixed Term and an Adjustable Rate VA Loan?
We here at Low VA Rates feel we stand strong and transparent in this category. We have blog posts and we’ve posted videos via YouTube and Facebook live stream in order to educate our customers about fixed rate and adjustable rate loans.
There are pros and cons for both loan types. So please, educate yourself before making a decision on which is the best one for you.
What Is Your Total Payment (or Cost) for the New Loan vs. the Original Loan?
To figure this out, take your total monthly payment and multiply it by 360 months for a 30-year term or 180 months for a 15-year term to figure out your total cost for your original loan. Then do the same thing for the new loan. That way you have a side-by-side comparison.
At Low VA Rates, we have a strict benefit rule. If your new loan exceeds the cost of your original loan, we won’t do the loan for you. However, we can make an exception if you have a letter explaining why you want to make that choice.
Do Offers of Skipped Mortgage Payments or Cash-Back Ultimately Get Added to My Loan Amount?
In regards to something like getting cash-back at closing through an escrow refund or skipped mortgage payments, they do add to your total amount. Our direct-mail marketing does explain this in the Terms and Conditions print on the reverse side of our flyers.
For skipped mortgage payments, if you call us, we never suggest that payments are skipped because skipping implies that the payment goes away.
Normally, by result of a refinance, you can defer no more than two mortgage payments. But the interest you’re not paying to your existing mortgage company gets attached to the back end of your loan. That’s one of the costs associated with a refinance.
Also, another thing worth mentioning, if you’re getting solicitations from us or another VA loan provider suggesting that you may be entitled to an escrow refund, keep in mind that we have no control over that and neither does any other VA lender.
However, it’s very standard on a refinance whether it’s a VA, FHA, or conventional loan, that whatever is in your current escrow account will be refunded within 30-45 days of the old lender being paid off. But a new escrow account will be created through us and that will be added to your loan.
Veteran Refinance Final Thoughts
We find this information to be very valuable, so we encourage you to share this post. These four questions are very important to keep in mind when refinancing. We want everyone to be educated on this subject and for everyone to find the route that suites them best.