What Are Today’s VA Refinance Rates?
On Monday, September 27, 2021 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 30-year VA refinance rate is 2.710% with an APR of 2.930%.
Current VA Refinance Rates
|30-Year Fixed Rate||3.010%||3.160%|
|30-Year FHA Rate||2.630%||3.520%|
|30-Year VA Rate||2.710%||2.930%|
|30-Year Fixed Jumbo Rate||3.020%||3.090%|
|20-Year Fixed Rate||2.870%||3.020%|
|15-Year Fixed Rate||2.290%||2.500%|
|15-Year Fixed Jumbo Rate||2.290%||2.350%|
|10-Year Fixed Rate||2.250%||2.440%|
|5/1 ARM Rate||2.700%||3.990%|
|5/1 ARM Jumbo Rate||2.690%||3.700%|
|7/1 ARM Rate||3.530%||3.740%|
|7/1 ARM Jumbo Rate||3.850%||3.620%|
|10/1 ARM Rate||3.850%||3.900%|
|30-Year Fixed Rate||3.040%||3.240%|
|30-Year FHA Rate||2.590%||3.470%|
|30-Year VA Rate||2.670%||2.860%|
|30-Year Fixed Jumbo Rate||3.050%||3.160%|
|20-Year Fixed Rate||2.890%||3.070%|
|15-Year Fixed Rate||2.300%||2.580%|
|15-Year Fixed Jumbo Rate||2.300%||2.380%|
|10-Year Fixed Rate||2.290%||2.510%|
|5/1 ARM Rate||2.790%||3.920%|
|5/1 ARM Jumbo Rate||2.910%||3.610%|
|7/1 ARM Rate||3.020%||3.740%|
|7/1 ARM Jumbo Rate||3.280%||3.570%|
|10/1 ARM Rate||3.260%||3.920%|
Rates as of Monday, September 27, 2021
What Is a VA Refinance Loan?
A VA refinance loan is a mortgage that replaces your existing home loan and is backed by the U.S. Department of Veterans Affairs. Refinancing your mortgage with a VA loan can be an easier process compared to a conventional refinance — but it’s not an option available to anyone. To qualify for a VA refinance loan, you’ll need to meet minimum military service requirements, in addition to the lender’s borrowing guidelines.
What Are the Types of VA Refinance Loans?
There are two main types of refinance loans that are backed by the VA: VA streamline loans and VA cash-out loans. Each type of loan can be used in specific circumstances.
1. VA streamline refinance loan
A VA streamline refinance loan, also known as an interest rate reduction refinance loan (IRRRL), is a simplified refinance program that can be used only to refinance an existing VA mortgage.
As the name suggests, a VA streamline refinance typically requires less paperwork than other refinance options. You may even be able to refinance without a property appraisal, credit check, or income verification. However, for VA streamline refinance loans, lenders may look at your mortgage payment history and require no late payments in the previous 12 months.
2. VA cash-out refinance loan
VA cash-out, refinance loans are slightly less restrictive than IRRRLs. You can refinance any type of mortgage, such as FHA loans or conventional mortgages, into a VA cash-out, refinance loan. With a cash-out refinance, you can take out a loan for more than what you currently owe and get the difference back in cash. Even if you don’t get cash back, any VA refinance loan other than a streamline refinance is considered a VA cash-out refinance.
A cash-out refinance can be a good way to consolidate high-interest debt or finance a home-improvement project. With a VA cash-out refinance, you can finance a larger portion of your home’s value (up to 100% depending on the lender) compared to a conventional refinance, which is typically capped at an 80% loan-to-value (LTV). But a cash-out refinance can leave you with a larger monthly payment, and usually will have a higher interest rate than other refinance loans.
VA Refinance Pros and Cons
A VA refinance loan can be an excellent way to reduce your interest rate and monthly mortgage payments. But these loans also have unique fees and restrictions to be aware of.
Streamline refinance loans usually don’t require an appraisal or credit check
No private mortgage insurance (PMI) is required
Easier to qualify for with a lower credit score
You can borrow a higher percentage of your home’s value compared to conventional cash-out refinance loans
Upfront VA funding fee of 0.5% to 3.6%
You can only use a VA streamline refinance with an existing VA loan
Must meet the minimum military service requirements or currently have a VA loan
Cannot refinance rental properties, in most cases
Who Qualifies for a VA Refinance Loan?
To qualify for a cash-out, VA refinance loan you must provide a Certificate of Eligibility (COE) obtained from the VA. You’re eligible for a COE if you weren’t dishonorably discharged and you meet the minimum military service requirement, which is generally satisfied within 90 continuous days of active duty service. A VA streamline refinance doesn’t require the borrower to provide a COE but it’s likely you already have one since you can use this loan only when you already have an existing VA loan.
VA cash-out refinance mortgages are available only for primary residences, so you can’t use this loan for a property you don’t live in. With an IRRRL, you can refinance a home loan for a property you no longer live in, but you must have previously lived in the home.
The VA has no minimum credit score requirement for the mortgages it insures, but the lenders that provide the loans will have certain baseline standards. While lenders’ underwriting guidelines vary, you’ll typically need a minimum credit score of 620 or higher. And to qualify for the best refinance rates you’ll want a credit score of at least 740.
When Is the Right Time To Refinance My VA Loan?
Mortgage refinance rates have risen slightly from their historic lows in 2020, but they’re still an excellent deal. So if you’re looking to secure a better rate, now could be the right time.
Before refinancing, you’ll want to ensure you’re saving enough on your interest rate or monthly payment to outweigh the upfront closing costs. You also want to pay attention to your refinance loan term. If you extend your loan term, not only are you adding years onto your mortgage, but you could end up paying more interest as well.
With a VA cash-out refinance there are a few additional considerations. If you’re switching from a conventional mortgage to a VA loan, then you may have the added benefit of being able to get rid of PMI. However, the VA funding fee and your interest rate will be higher with a cash-out refinance, compared to an IRRRL. A cash-out refinance is still a useful tool because it can be an affordable way to consolidate high-interest debt or to fund home renovations.
What Is a Good VA Refinance Rate?
The refinance rates offered to you will depend on your credit health. In general, current mortgage refinance rates are relatively low. If you can secure an interest rate at or below 2.5% for a 15-year refinance or under 3% for a 30-year refinance, you’re getting a great deal.
But you should also need to know what fees you’re paying. Two lenders may offer you the same rate, but one could be charging you thousands of dollars more in fees. One way to make sense of the fees is to look at the annual percentage rate, or APR. Your APR factors in not only the interest rate, but also certain fees, including loan origination fees and mortgage points.
How Much Does a VA Refinance Cost?
Refinance loan closing costs average 2% to 5% of the loan amount, which can add up to thousands of dollars for the average mortgage refinance. The exact fees you pay will vary by lender, so it’s important to shop around, and to compare Loan Estimates from a few banks, credit unions, or other lenders.
Which type of VA refinance loan you use will also impact the fees you pay. All VA loans come with a funding fee, unless you can qualify for a funding fee waiver. For VA streamline refinance loans, the funding fee is 0.5% of the loan amount, so $500 for every $100,000 borrowed. One advantage to a streamline loan is you may be able to avoid paying for a new appraisal, which can cost $300 to $600.
A VA cash-out refinance will be more expensive than a streamline refinance. Not only do cash-out refinance loans typically have higher interest rates, but the funding fee is also increased. If your refinance is your first use of your VA loan benefits, the funding fee is 2.3% — and 3.6% for each subsequent refinance.
How do I Refinance a VA Loan?
The process of refinancing a mortgage is similar to taking out a mortgage to purchase a home; you’ll have to find the right lender and go through the mortgage underwriting process. But because you’re not purchasing a home, the process will be more simple and require a bit less paperwork.
1. Determine what type of loan you need
There are several factors that go into determining which type of VA refinance loan is the best for you. A streamline, or IRRRL, loan is the easiest and most affordable option. It has a lower funding fee, and fewer verification requirements. But there’s a catch: You’ll need to refinance from a VA loan, so if you have a USDA loan or a conventional mortgage, you’ll need to use a VA cash-out refinance loan instead.
2. Shop around for the best VA-approved lender
Most VA refinance loans are not issued by the Department of Veterans Affairs. Instead, traditional lenders issue mortgages that are guaranteed by the VA. So you’ll need to find banks, brokers, and credit unions that offer VA-backed mortgage loans.
Once you’ve found a few lenders, you can compare rates and fees. You should also find out how often the lender works with VA loans. VA-backed mortgages have guidelines that are different from other types of home loans, and working with an experienced loan officer can make the process much easier.
3. Provide documentation to your mortgage lender
The lender will need to verify your income, assets, credit score, and debt-to-income ratio (DTI). So have pay stubs, W-2 forms, bank statements, and loan statements ready to go ahead of time.
If you qualify for an IRRRL, some lenders will require much less paperwork. As long as you’re current on the payments with your existing VA loan and you haven’t had any late payments in the past year, you may not need to verify things like your income or credit score.
4. Close on the refinance loan
During the closing process, the lender will validate your ability to repay the loan by reviewing the documentation you provide, if necessary. This is also when the bank will usually require an appraisal to ensure it isn’t lending more money than the property is worth. However, with a VA streamline loan, an appraisal may not be required.
How Do I Find the Best Refinance VA Loan Rates?
To find the best VA refinance loan rates you’ll need to shop around to compare lenders. Lenders offer lower refinance rates to borrowers they deem less risky, which usually means having a higher credit score, lower DTI, and more equity in your home. But each lender will evaluate your situation differently, so it pays to look at refinance mortgages from multiple lenders.
Your loan term will also impact the interest rate. Refinance loans with shorter terms will typically have lower rates. So a 15-year loan will have a better refinance rate than a 30-year loan.
Who Sets VA Loan Rates?
Most VA loans (with the exception of Native American Direct Loans) are originated by private lenders, rather than VA itself. Because of this, VA loan rates are set by private lenders, not the federal government. Mortgage refinance rates, whether for VA loans or conventional loans, depend on market factors as well as personal factors, like your credit score, income, and loan-to-value ratio. Different lenders may offer different rates, so you should always compare offers to find the best deal.
How do VA loan rates compare with the rest of the market?
Like all mortgage rates, the VA loan rate you get will depend on the lender and your personal financial profile. You’ll typically need a good credit score, stable income, and a low loan-to-value ratio to get the best rates.
In general, average VA loan rates tend to be lower than average conventional loan rates. However, exact rates may vary by lender, so make sure you’re shopping around to get the best deal.