Hello, I am looking for recommendations on refinancing a VA home loan.
In 2010, using a VA home loan, I purchased a single-family home in Elizabethtown, Kentucky for $168,450 and currently owe $144,256. The loan is a 30-year fixed mortgage with 3.75%. This home became an investment property in 2015. The current value of the property is approximately $194,931. The home equity is $50,675. The different refinance options I have reviewed are the Interest Rate Reduction Refinance Loan (IRRRL) and conventional loan.
I have been renting a home in Huntsville, Alabama since 2017 and looking to purchase a new property here early next year. If I maintain my current VA loan in Kentucky, my benefit in Alabama is $340,094, which could still provide either a good forever home or investment property.
Since 3.75% is a low rate, I am not sure if I could get a lower rate using the IRRRL and if I would refinance with a conventional loan, my rate could go up; thereby, I would lose cash flow on the property.
Any recommendations or insight would be helpful. Thank you.
Good afternoon @Andrew Kretz .
You’ve done your homework and your thought process is spot on from what I see. With recent news that the fed may cut its key interest rate you may be able to get a similar rate if you refinance. That helps.
A refinance will have some impact on your credit score but depending on how soon you’re looking to make your next purchase that may not be a factor.
If you don't financially need to refinance to buy your next property you might hold off. But if you need to, or just want to free up you VA benefit, I'd say do that before your next purchase if the timeline makes sense.
Hope this helps. Good luck!
@Andrew Kretz Also look at Mortgage brokers. They shop around to different banks to find you the lowest rate possible. They have access to wholesale rates which are lower than the retail rates you would have access to. A lot of mortgage brokers also do not charge any lending or underwriting fees which will save you some money in closing costs. They make their money by selling your loan to the bank so it's a win-win for the borrower. Hope that helps!
I just inquired about this. So you can take out a second VA Loan up to a certain $ amount depending on your county. I would just leave that other one alone and just keep building equity and cash flowing. Since there isn't really a reason to roll out of it unless you're wanting to cash out. If you did that, you would need 20% equity in the property which you have. Just depending on if you're wanting to cash out or just acquire another property using the VA loan.
If you're able to buy the property you want in Alabama with your remaining VA entitlement, I don't see any reason to mess with your existing mortgage in Kentucky. The only reason I'd consider refinancing the Kentucky property were if you needed the full VA entitlement to buy the property you want in Alabama or another property in the future. Otherwise, I think you'd be hard pressed to find a better rate than 3.75% for an investment property (though if you do, let us know!)
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