Current VA Refinance Rates | December 2021
As reported from a weekly survey of 100+ lenders by Freddie Mac, the average mortgage interest rates fluctuated slightly week over week — 30-year fixed increased (3.1% to 3.11%), 15-year fixed decreased slightly (2.42% to 2.39%) and 5/1 ARM increased slightly (2.47% to 2.49%).
VA refinance rates are no different. In fact, when compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than for the average consumer.
VA Refinance Rates 2021
When should you refinance?
In general, if you can save money over the life of your loan, then you should consider refinancing.
Everyone’s financial situation is different, however, and refinancing can help you achieve a few different financial goals. Below are some of the most common reasons homeowners refinance:
- Lower your interest rate and monthly payment. Refinancing into a lower interest rate not only reduces the total interest cost you owe over the life of the loan, but it can reduce your monthly mortgage payment as well. This is the most common reason to refinance.
- Change your loan terms. With a refinance you can adjust the length of loan term, convert an adjustable-rate mortgage to a fixed-rate mortgage (or vice versa) or get rid of private mortgage insurance (PMI) by replacing your loan with one that doesn’t require it (like a VA loan).
- Fund home projects or consolidate your debt. If you’ve earned enough equity in your home, then a cash-out refinance allows you to tap into that equity for cash. There are no restrictions on how you can use the money, so many homeowners use it to pay for home repairs or remodel projects as well as to consolidate debt.
What type of refinance should I choose?
There are two types of VA refinance loans: VA streamline refinance and VA cash-out refinance.
Both have different benefits and loan processing requirements, so it’s important for homeowners to know what they want to accomplish with a refinance.
VA Streamline Refinance
Also known as an Interest Rate Reduction Refinance Loan (IRRRL), the VA streamline refinance is best if you want to lower your interest rate and monthly payment. In fact, your new monthly payment must be lower than your current one to be eligible for this loan.
The IRRRL has one of the easiest refinancing processes — you don’t typically have to verify your income or credit score, and you don’t need a home appraisal.
An IRRRL is also the cheapest VA refinance option. The VA funding fee due on closing for this kind of refinance is only 0.5% of the loan amount; a cash-out refinance can cost as much as 3.3%.
VA Cash-out Refinance
The VA cash-out refinance loan is the only refinance option for taking out some or all of the earned equity in your home as cash.
Qualifying for this loan is a longer process than an IRRRL. You’ll need to meet similar requirements to when you purchased your existing home, including credit score and debt-to-income ratio requirements, plus a new home appraisal.
Is a refinance worth it? How to calculate your break-even point
The break-even point is the amount of time it will take to recoup the costs of a refinance and start saving on the overall cost of the mortgage. A quick calculation can tell you whether it’s worthwhile to refinance — and when.
Start with rough estimates of the savings you can expect from a refinance, along with the closing costs you’ll pay to do so, including:
- Lender fees
- Escrow requirements
- Title costs
- Third-party fees, like an appraisal or attorney costs
When estimating your upfront fees, keep in mind that refinance closing costs are typically 3-5% of the loan amount.
Our mortgage calculator can help you crunch the numbers.
First, input your existing mortgage balance along with the refinance rate you’re likely to get. The calculator will show you the difference between your current monthly payment and your potential new one.
Next, divide the costs of refinancing that you calculated above by the monthly savings indicated by the mortgage calculator. The result is the number of months required to recoup any closing costs.
This is a rough number but one that can help you decide whether a refinance is worth pursuing. Plus, it’s a useful starting point as you get firmer loan estimates from multiple lenders.
How do I get the best VA refinance rate?
According to research from the Consumer Financial Protection Bureau (CFPB), almost half of consumers don’t compare quotes when shopping for a home loan. This means many consumers are losing out on substantial savings.
Comparing quotes from three to five lenders ensures you’re getting the lowest refinance rate for you. Some lenders may even waive certain fees and closing costs.
Interest rates determine what you’ll pay monthly as well as the total interest amount over the life of the loan. Even a half a percentage point decrease can mean a savings of thousands of dollars to the amount you’ll owe overall.
How long will a refinance take?
According to the ICE Mortgage Technology April 2021 Origination Insight Report, the average VA loan took 59 days to close. That’s just four days longer than the average conventional loan, and only two days longer than the average FHA loan.
The time required to close will depend on how busy your lender is, how prepared you are, and on your loan type. IRRRLs are likely to close more quickly than cash-out refinances.
Finally, you may be able to help your refinance move more smoothly and quickly by staying in good communication with your lender and having your documentation ready ahead of time.
6 Steps for a VA Refinance
To recap, here’s what to expect during the VA loan refinance process:
- Identify your refinancing goals and choose a VA loan refinance program (IRRRL or VA cash-out refinance)
- Request loan estimates from three to five VA lenders
- Choose the best loan estimate for you and submit an application to lock in your refinance rate
- Submit any required documentation
- Confirm your closing cost statement prior to closing
- Sign and close
Refinancing your VA loan may take some effort and money upfront, but could potentially save you thousands of dollars over the life of your loan.