Best VA Mortgage Refinance Rates for December 2021

Photo to accompany story about VA refinance rates. Getty Images
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The refinance window is still open — especially if you have a veteran loan. 

Mortgage refinance rates have been creeping higher but are still considered very low compared to historical standards. VA loans typically have even more attractive interest rates than other loan types, giving VA borrowers an opportunity for potential savings. Refinancing a VA loan can save borrowers hundreds of dollars a month and thousands over the loan’s lifetime. 

Here is how to make sense of a VA loan refinance. 

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What the Experts are Saying About 2021 VA Refinance Rates

The consensus among experts is that interest rates will continue to rise throughout the end of 2021 and into 2022. The mortgage rate market moves almost inversely to the economic health of the country, says Lucy Randall, director of sales and operations strategy at Better, a digital mortgage lender. (Better is a NextAdvisor advertising partner. This article was independently produced by our editorial team with no involvement by Better.) The unemployment rate is dropping, and the White House is pursuing an aggressive plan to stimulate the economy. “All of these things are kind of signaling a stronger economy coming soon.”

However, VA mortgage rates and VA refinance rates aren’t expected to skyrocket overnight. The increase is likely to be gradual and more moderate. “When we’re talking about an increase, we’re not looking at 5%, or even in the 4% [range], it’s still quite competitive,” Randall says. Even with some rate volatility in the coming months, some experts forecast somewhat flat rates for the coming month. Homeowners who haven’t locked in a new low interest rate still have an opportunity to refinance.

What the 2021 VA Refinance Rate Forecast Means for You

When determining what refinance loan is the best for your situation, two of the most important criteria to evaluate are the interest rate and the fees. Government-backed loans, like VA loans, are less risky for lenders because they are insured by the government. Borrowers with weaker credit scores may be eligible for a more competitive interest rate with a VA loan than with a conventional loan.

However, a VA refinance loan’s fees can be high. Depending on your situation, VA funding fees could offset a low interest rate — making it a more expensive option. 

Some applicants could qualify for an exemption, but most VA loans come with a unique funding fee. This upfront fee can add thousands of dollars to your refinance closing costs and should be factored into overall loan costs. 

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 mortgage insurance. However, the VA funding fee and your interest rate will be higher with a cash-out refinance compared to a VA Interest Rate Reduction Refinance Loan (IRRRL). A cash-out refinance can be a useful tool because it can be an affordable way to consolidate high-interest debt or fund home renovations, but you’ll want to run the numbers first.

Homeowners looking to take advantage of rising home values by turning their equity into cash may want to consider a conventional cash-out refinance. For borrowers who want to save on interest and reduce their monthly payments, an IRRRL can be an affordable and easy way to refinance. 

Mortgage refinance rates have risen slightly from their all-time historic lows in 2020, but they’re still an excellent deal. 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.

So if you’re looking to secure a better rate, now could be the right time. It’s always good to explore your refinancing options and compare different types of loans from at least two to three mortgage lenders.

What Are Today’s VA Refinance Rates?

On Sunday, December 05, 2021 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 30-year VA refinance rate is 2.790% with an APR of 2.990%.

Current VA Refinance Rates

ProductInterest RateAPR
30-Year Fixed Rate3.130%3.250%
30-Year FHA Rate2.700%3.580%
30-Year VA Rate2.790%2.990%
30-Year Fixed Jumbo Rate3.120%3.190%
20-Year Fixed Rate3.010%3.130%
15-Year Fixed Rate2.440%2.600%
15-Year Fixed Jumbo Rate2.430%2.490%
10-Year Fixed Rate2.420%2.580%
5/1 ARM Rate2.690%3.980%
5/1 ARM Jumbo Rate2.680%3.690%
7/1 ARM Rate2.880%4.000%
7/1 ARM Jumbo Rate2.890%3.920%
10/1 ARM Rate3.090%4.080%
ProductInterest RateAPR
30-Year Fixed Rate3.140%3.300%
30-Year FHA Rate2.660%3.530%
30-Year VA Rate2.750%2.920%
30-Year Fixed Jumbo Rate3.130%3.220%
20-Year Fixed Rate3.020%3.170%
15-Year Fixed Rate2.440%2.670%
15-Year Fixed Jumbo Rate2.430%2.500%
10-Year Fixed Rate2.420%2.610%
5/1 ARM Rate2.760%4.070%
5/1 ARM Jumbo Rate2.810%4.050%
7/1 ARM Rate2.870%3.980%
7/1 ARM Jumbo Rate3.000%4.010%
10/1 ARM Rate3.090%4.040%

Rates as of Sunday, December 05, 2021

About These Rates

These rate averages are based on weekday mortgage rate information provided by national lenders to Bankrate.com, which like NextAdvisor is owned by Red Ventures. These averages provide borrowers a broad view of average rates that can inform borrowers when comparing lender offers. These average rates are updated daily, though it is possible rates have changed since this was last updated.

How to Use Our VA Refinance Rate Table

Our VA refinance rate table lists the current interest rate and annual percentage rate (APR) for VA loans. It also details the average rate for conventional loans and other types of government-backed loans, such as FHA loans. This table makes it easier to compare various loan types, which is an important part of finding the best refinance option for your situation.

Pay close attention to the APR and terms, which represent the true cost of the loan. The APR factors in the interest rate, plus fees. Shorter-term loans, such as the 15-year refinance, usually have lower interest rates than longer-term 30-year refinance loans. Government-backed loans, such as VA USDA, or FHA loans, are easier to qualify for but may have higher APRs. 

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 backed by the VA: VA streamline loans and VA cash-out loans. 

1. VA streamline refinance loan

A VA streamline refinance loan, also known as 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 VA cash-out refinance, you can take out a loan for more than what you currently owe on your existing mortgage loan 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.

Pros

  • 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

Cons

  • 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

VA Loan Refinance: Frequently Asked Questions (FAQ)

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.

What is a good VA refinance rate?

The refinance rates offered to you will greatly depend on your personal circumstances. Your credit score, loan balance, and property location can all influence your interest rate. But at the end of the day a good refinance rate is an interest rate that can help you get closer to your financial goals. 

In general, current mortgage refinance rates are relatively low. If you can secure an interest rate anywhere near 3%, you’re getting a low interest rate. However, whether or not it’s a good rate depends on other factors, such as the interest rate on your current loan and the fees you have to pay to get that rate. 

If your goal is to reduce your interest rate to save money, but you can only refinance to a rate that’s 0.25% lower than your current rate, then it may not be worth it. Sometimes what looks like a low rate can be saddled with extra fees, such as discount points, which reduce the rate you pay but greatly increase your upfront costs. So it’s worth taking the time to look at both the rates and fees while putting them in the context of your goals.

How much does a VA refinance cost?

Refinance loan closing costs average 3% to 6% 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 compare Loan Estimates from a few 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 or $500 for every $100,000 borrowed. One advantage of a streamline loan is you may 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.

  1. 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.

  1. Provide documentation to your mortgage lender

The lender will need to verify your income, assets, credit score, and debt-to-income ratio (DTI). Have pay stubs, W-2 forms, bank statements, and loan statements ready to go ahead of time. Your lender will also need to verify your employment status. These days lenders are more diligent when verifying employment, sometimes even confirming you are still employed on the day of closing.

If you qualify for an IRRRL, some lenders will require much less paperwork. As long as you’re up to date 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.

  1. 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. 

When you refinance a mortgage, you will be on the hook for closing costs, but you won’t have to pay what is generally the biggest out-of-pocket expense on a mortgage – a down payment.

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 and more home equity. 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 refinance loan will have a better refinance rate than a 30-year refinance 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. However, exact rates may vary by lender, so make sure you’re shopping around to get the best deal.