I got a couple of quotes from my mortgage broker on a refinance to go from my current non-VA ARM mortgage at 4.25% to a VA 30-yr conventional at:

4.125% interest with 2.83% credit or,

3.25% interest with 0.983 credit.

My broker recommends the first one saying that I can refi with IRRRL 6 months later to a lower rate provided the rates keep dropping. Plus, the total loan amount is lower because of higher credit. It saves me about $300/month whereas the 3.25% saves me $550/month but has a higher loan balance.

Which is the better option?

I'm leaning towards the 4.125% deal because it gives me some flexibility down the road to refi under IRRRL and my LTV for a HELOC would be better with it. Thoughts?

3.25% makes more sense to me. That's an extra $250/mo in savings.

Will your broker guarantee you that rates are going to be lower in 6 months? 

@Nick B. Yes, that was my line of thought, too. Freeing up more cash would help me in the long run but the total loan amount is $13K higher than the higher interest rate. Just need to find out if and how I can request VA funding fee refund AFTER I retire from service.

@Bob B. If only they could! Yes, the market is unpredictable and extremely speculative from my stand point. That uncertainty definitely persists though I'm one to take more risk....but since both have its own benefits and risks/costs it makes me teeter between both options repeatedly. It boils down to personal plans and preferences for sure and I just wanted to get some feedback from BP members on your own preferences.

Originally posted by @Sam Shin :

@Nick B. Yes, that was my line of thought, too. Freeing up more cash would help me in the long run but the total loan amount is $13K higher than the higher interest rate. Just need to find out if and how I can request VA funding fee refund AFTER I retire from service.

 What prevents you to take a lower loan amount or take a higher one and immediately pay down that $13K difference?

@Nick B. Nothing really. I'm still working the numbers because my plan is to take a HELOC on my mortgage to use it for my first investment property. The higher loan balance on the lower rate after paying down $13K still puts me over 80% LTV, but lower debt to income ratio. Whereas the higher rate would be right about 80% LTV. Soooooo....I just gotta make a decision on how soon and where I want to buy a REI property.

If this is HELOC, you open it to the maximum possible amount at the minimum rate but only draw from it what you need and when you need it.

If this is a regular refi to another 30yr fixed, then you can set any loan balance for the new loan within lender's constraints (e.g. between $50K and 80% LTV).

@Nick B. It's a regular refinance 30 yr VA. I'm not taking cash out because the rates and cost of loan will be too much. My plan as of now is:

Take the 3.25% at 0.983 credit

Pay down $13K

Get HELOC (3 yr intro rate 2.75%)

Buy REI property in Pac NW

@Sam Shin which bank is offering a 2.75% intro rate for 3 years on a HELOC? At what LTV? Is that a VA program?

@Sean McCluskey American Savings Bank Hawaii. Offered at 80% LTV. Dunno if it's limited to property on the islands though. But they have some great intro rates for 2 years @ 1.75, 3 years @ 2.75 and 4 years @ 3.75 year.

Originally posted by @Sam Shin :

@Sean McCluskey American Savings Bank Hawaii. Offered at 80% LTV. Dunno if it's limited to property on the islands though. But they have some great intro rates for 2 years @ 1.75, 3 years @ 2.75 and 4 years @ 3.75 year.

 Thanks! Yeah those are great rates. I would lock in the 3.25% 30 year fixed. Set it and forget it!

Happy to report that I've managed to get a sweeter refinancing deal: 3% with 1.88% credits!

Also, just closed and recorded on my first two transactions as a Realtor! One sale, one purchase!