Getting the Most from a VA Loan Refinance Calculator

Purchasing a home is one of the most significant financial decisions anyone can make. For veterans and active-duty military members, VA loans make homebuying more accessible with benefits like no down payment and no private mortgage insurance requirements

When it comes time to consider refinancing an existing mortgage, VA loans also offer advantages with lower rates and costs compared to conventional loans. However, any refinance needs to make good financial sense for your situation. This is where using a VA loan refinance calculator comes in handy.

In this article, we’ll look at how VA refinance calculators work, key factors to consider, and tips on using these tools effectively when weighing a mortgage refinance. Read on for a comprehensive guide to help you determine if a VA Streamline Refinance or VA Cash-Out Refinance is right for you.

What is a VA Refinance Calculator?

A VA refinance calculator is an online tool that allows you to estimate potential monthly payments, interest savings, closing costs, break-even points, and other metrics on a VA mortgage refinance. Most lenders provide free VA refinance calculators on their websites.

These calculators take information like your current loan details, new loan amount, and estimated rates and fees to illustrate the financial impact of refinancing your existing VA home loan. The estimates give you an idea of the costs, savings, and timeframe for “breaking even” on the refinance.

Key factors a VA refinance calculator considers:

• Current loan amount, remaining balance, interest rate and term
• New loan amount, estimated interest rate and term
• Closing costs for the refinance
• VA funding fee
• Estimated monthly payment savings
• Projected interest savings over loan lifetime
• Break-even point showing when savings surpass refinance costs

You input details on your current loan and desired new loan, and the calculator provides an overview of the numbers to help assess if refinancing makes sense.

Why Use a VA Refinance Calculator?

As the old saying goes, “run the numbers” before making any big financial move. A VA refinance calculator serves as a tool to take the guesswork out of deciding whether to refinance and which option best meets your needs and goals.

Specifically, a good VA mortgage refinance calculator helps you:

• Compare current vs. new loan terms – See how proposed rate/term changes on a new loan affect your finances

• Estimate monthly savings – Determine how much you may lower your monthly mortgage payments

• Calculate total interest savings – Project interest savings over the full loan term with lower rates

• See breakeven point – Find when savings outweigh refinance closing costs

• Avoid expensive mistakes – Make an informed decision using real numbers versus guesses

• Shop and compare lenders – Use various lenders’ calculators to compare loan terms, fees and closing costs

Having the numbers mapped out clearly makes it easier to evaluate if refinancing a VA home loan is the right move based on your individual financial situation and goals.

Factors to Consider with a VA Refinance

When using a VA refinance calculator, be sure to think through these key factors that will impact your cost/benefit analysis:

Loan Term

The length of the new loan affects interest costs over time. Typically, a 15-year term will have higher monthly payments but build equity faster with less interest paid overall. A 30-year term often lowers monthly payments but results in more total interest paid over the full loan period.

Loan Amount

With a VA Streamline Refinance, the new loan amount is usually similar to your current balance. But a VA Cash-Out Refinance lets you take equity out as part of the new loan amount. This increases the loan balance, monthly payment, and overall interest costs.

Interest Rate

The lower the new interest rate, the more you’ll lower monthly payments and lifetime loan costs. Be sure to get current rate quotes when using any VA refinance calculator.

Closing Costs

Closing costs include lender fees, the VA funding fee, appraisal/inspection fees and more. VA Streamline Refinances typically have lower closing costs than a regular “cash-out” refinance.

Break-Even Horizon

Know how long it will take for savings to surpass closing costs so you break even. This horizon affects whether refinancing makes sense based on your plans to stay in the home.

Thinking through these variables will lead to more accurate projections. Be as precise as possible when entering details into any mortgage refinance calculator.

Tips for Using a VA Refinance Calculator

Follow these tips to get the most out of VA mortgage refinance calculators:

• Use current rates – Rates change frequently, so use up-to-date rate quotes when calculating savings.

• Input precise loan details – The more accurate your current loan data, the better the estimates.

• Factor in all closing costs – Be sure to include lender fees, VA funding fee, appraisal, title charges and more.

• Consider different terms – See payments and interest impact based on 15-year, 20-year, or 30-year new loan term options.

• Try several calculators – Use tools from multiple lenders to compare projected savings and breakeven points.

• Ask about discounts – Inquire with lenders about any rate discounts or seller contributions that could reduce closing costs.

• See personalized quotes – For the most accurate numbers, speak to a loan officer and ask them to run a customized VA refinance analysis.

With the right approach, a VA refinance calculator removes uncertainty by detailing the real costs, monthly changes, total interest savings, and breakeven timelines.

Steps for Refinancing a VA Loan

Once you’ve used a VA refinance calculator to assess the potential numbers, follow these steps to move forward with a VA mortgage refinance:

1. Compare multiple lenders – Shop lenders and compare interest rates and fees to find the best overall value. Look for customer satisfaction and reviews on lenders as well.

2. Check eligibility – Confirm you meet VA underwriting guidelines and credit requirements for approval. Streamline Refinances have particular eligibility criteria.

3. Compile documents – Lenders will need documentation like bank statements, tax returns, pay stubs, and VA Certificate of Eligibility.

4. Complete the application – Formally apply and submit all needed paperwork to the lender. Lock in an interest rate when ready.

5. Get appraisal – For a VA Cash-Out Refinance, an appraisal is required to assess home value and determine available equity.

6. Close on new loan – After approval, you’ll sign closing documents to finalize the new mortgage loan.

7. Pay off old loan – The lender pays off your prior mortgage balance and the refinanced loan takes effect!

Be sure to consult your lender’s mortgage specialists throughout the process.

Know Your VA Refinance Options

The VA offers two main mortgage refinance options – the VA Streamline Refinance and VA Cash-Out Refinance. VA refinance calculators help you analyze both choices. Let’s compare the key features:

For VA Streamline Refinances in particular, it’s good to use multiple lenders’ VA refinance calculators to find the best combination of low fees, closing costs, and interest rate for optimizing your savings.

When does Refinancing a VA Loan Make Sense?

In general, refinancing a mortgage is smart when:

• You can lower the rate significantly on a new loan (typically at least 0.5% lower)

• Your break-even horizon is reasonable based on your plans to stay in the home

• There are financial benefits like lower monthly payments, shorter loan term, tapping equity, etc.

• You have sufficient equity to qualify if doing a cash-out refinance

• Your credit profile has improved allowing you to qualify for better loan terms

But ultimately, the advantage of VA refinance calculators is they provide the real numbers to guide your decision based on your exact loan situation and goals.

Use VA Refinance Calculators as Tools, Not Tripwires

While very helpful for modeling potential new loans, keep in mind that VA mortgage refinance