How to Pay Your VA Home Loan off Faster
How to Pay Your VA Home Loan off Faster
By Garrett S Law NMLS#20750 – Nationally Ranked VA Home Loan Expert
The VA home loan benefit allows Veterans to get a VA home loan with no money down. Did you know you can also refinance your mortgage taking out up to 100% of the appraised value? Although it is important to keep a handle on your monthly budget and keep that mortgage payment low it can be necessary to take cash out to consolidate high interest credit card debt or perhaps you need to make improvements to the property. The VA has made provision in the VA home loan program to allow Veterans to borrower up to 100% of the appraised value of their home.
It is a better idea to take equity out of the home to fund improvements to the home or consolidate debt than to run up your balances on credit cards. The interest on a VA loan is simple interest amortized over a thirty year period. Therefore, by increasing your VA mortgage balance to take cash out the payment impact to your budget is much less than it would be in another form of debt. Interest rates are at an all-time low so the cost of borrowing the money has never been less. Compare current VA mortgage interest rates to credit card rates and the rate of interest is almost always 12% lower. Credit card interest accumulates more aggressively (compounds faster) as well.
Many Veterans are concerned about paying their home off quickly. No one likes to see their mortgage balance increase. It can make sense though to consolidate debts into the mortgage. This cash out refinance loan can actually help Veterans pay their mortgage off faster. It actually can help Veterans to pay their home off quicker. Here is a brief example to illustrate how this works. A Veteran owns a home with a mortgage balance of $200,000 with a monthly mortgage payment of $930. The Veteran has accumulated credit card debt of $20,000 due to medical bills, housing maintenance costs, & other consumer expenses. The credit card payments are $800 a month. If the Veteran does a VA cash out refinance loan & takes out $20,000 to pay off the credit card debt the mortgage payment goes up $97 to $1023. Clearly this helps the household free up cash flow. If the Veteran continues to pay what they were paying on the mortgage & credit cards before they did the consolidation (an additional $707) the new VA loan would be paid off in 165 months which is 13.75 years. Wow.
The VA home loan benefit can be used over and over again. Many veterans think they get on shot at using their VA home loan eligibility. This is not the case. In fact Veterans can have two VA loans at the same time as long as the entitlement covers both loan amounts. In terms of doing a VA cash out refinance do not worry that by doing a VA cash out refinance loan you are using your eligibility once & for all.
Getting started on this program is actually pretty easy. Completing this loan requires all of the normal documentation similar to when you purchased the home. Although it may take a few extra minutes to grab a few extra documents the benefit is tremendous. The documentation needed will be identification, income, assets statements, employment verification, appraisal, pest inspection, and documentation on any liabilities (typically pulled from the credit report). The truth is although this loan can be simple to get many loan officers & many companies. It is important to work with a VA loan company who understand the program and understand how to get your loan file set up correctly. Having a good experience in getting your loan is all about working with a professional who knows how the program works. When asked for documentation up front it is recommended you do a thorough check to provide all documentation you have been asked for. Provide it promptly as the request(s) are made to keep things moving forward.
Veterans with young growing families, consumer debt, need for cash, or with a desire to pay their mortgage off faster should take a serious look at doing a VA cash out refinance loan. The VA has given them this incredible tool to both achieve home ownership but also to assist in their monthly budget as their needs change over time. Reach out to the experts at Low VA Rate to get a free analysis. Low VA Rates is a company focused on servicing Veterans and their families in helping them to take advantage of their VA home loan benefit.
