Can VA Mortgage Loans Be Recast?

No matter what type of home loan you use to buy your home, you always want to find ways to reduce your monthly mortgage payments. With traditional mortgages, it’s possible to recast the loan. Recasting a loan happens when the borrower makes a large payment on the loan and gets the lender to recalculate their mortgage payments based on the remaining principal amount. It immediately lowers your monthly payments for the remainder of the loan’s terms. However, for borrowers with VA mortgage loans, recasting isn’t an option. You’ll have to find other ways to lower your monthly payments.

Refinance the Loan

VA mortgage loans can be refinanced to take advantage of lower market interest rates. The best way to do it is to apply for an Interest Rate Reduction Refinance Loan (IRRRL) otherwise known as a streamline refinance loan. These loans allow you to take advantage of lower interest rates and allows qualified veterans to transition out of adjustable rate VA mortgage loans and into a lower fixed-rate interest loan.

This loan type can only be used to refinance existing VA mortgage loans and can’t be used to transition from a conventional mortgage to a VA loan. You must also have a good payment history with no more than one late payment in the last year.

Cash-Out Refinance

As you make payments on home loan, you start to build equity in your home. You can use that equity to help lower your interest rate by starting a cash-out refinance loan. This process creates an entirely new loan for the current appraisal value of your home. Once the loan is generated, you receive the difference between your new mortgage’s amount and the value of your home in cash. You’re free to use the cash as you see fit, but the new mortgage amount will be higher than your original loan.

This option is one you should only choose if you bought a house at a much higher interest rate as you will end up increasing the amount of money you owe to the lender. You must also have equity in your home to qualify for the cash-out refinance.

Explore Your Options

For homeowners with existing VA mortgage loans with higher interest rates, refinancing is the best way to lower your monthly payments and decrease the interest you’ll owe over the life of the loan. Contact our team to discuss your refinancing options today.