July 13, 2017 – Three strategic factors for military families to consider when refinancing a VA IRRRL, VA Purchase, Fannie or Freddie, or FHA existing mortgage, by Anthony Powell, Vice President of Operations of AAFMAA Mortgage Services. Mortgage choices have expanded in the last five years as non-safe harbor loans offered by REITs, banks, and hedge funds have sought higher yields. New investment funds have entered the mortgage market and the resulting mortgage products look familiar – income, assets, credit, and other underwriting factors are expanding.
Military families considering refinancing should think through three key factors before refinancing. First and foremost is the obvious, does the military family intend to stay put for at least three years? Younger military families that are PCSing (relocating) frequently should be renting. The cost of refinancing and moving within the first three years can be mitigated through a no-closing cost mortgage (which simply results in a higher interest rate to pay for the closing costs). However, to gain the maximum advantage from a refinance the military family should be in the home at least three years, depending on current mortgage interest rate.
The second key refinance factor for a military family to consider is the actual savings from a refinance. VA IRRRLs (streamlined refinances) can be very effective at keeping closing costs to a minimum. Assuming the veterans, active duty military, or military family qualifies, appraisal costs and certificate of eligibility may be as low as zero cost. However, other costs such as title insurance, credit, and other fees should still be considered when refinancing. Generally speaking, a refinance makes sense if the military family can save about .25% in rate and plans to stay in the home at least three years. The more savings, the better. AAFMAA Mortgage Services licensed state loan officers are here to advise on refinance benefits and calculate ability to repay.
The third key factor (besides time in home and savings) is whether the military family believes a strategic refinance is viable. For example, military families may switch from an Adjustable Rate Mortgage (or refinance a home equity line of credit, which typically has an uncapped interest rate) to a Fixed Rate Mortgage to save money or gain peace of mind. Switching from a 30 year fixed to a 15 year fixed is another strategy, but suggested for long-time horizon military families and/or well capitalized (lots of cash on hand) borrowers.
The best place to start is to determine what the military family’s payments and interest rate are today. From there, military families can get a feel for savings from mortgage calculators on the web. AAFMAA Mortgage Services provides a mortgage calculator at aafmaa.com/mortgage.
Competitive, accurate, honest, transparent, and member-owned. Experience the difference at AAFMAA Mortgage Services. AAFMAA Mortgage Services LLC is licensed in the States of Alabama, Delaware, North Carolina, Florida, Virginia, Maryland, Connecticut, Tennessee, Kansas, Rhode Island, Oklahoma, and Pennsylvania (NMLS: 1423968). The team operates from 639 Executive Place, Suite 203, Fayetteville, North Carolina 28305. Call 844-422-3622 (844-4-AAFMAA), email mortgage(at)aafmaa.com or visit the website at http://www.aafmaa.com/mortgage to reach AAFMAA Mortgage Services. Equal Opportunity Lender. Lender NMLS: 1423968. Anthony Powell, NMLS ID 78385.