Mortgage Killer Accelerator

Strategy 28 of 107

Veterans: a VA streamline refinance (IRRRL) at the same payment

Most predictableFrom a lower cost of the same debt

What it is

With an existing VA-backed loan, ask lenders for an interest rate reduction refinance loan.

Steps

  1. With an existing VA-backed loan, ask lenders for an interest rate reduction refinance loan.
  2. Compare total closing costs and the funding fee with the interest saved.
  3. After closing, keep paying the old amount; the difference goes to principal.

Repeat: Whenever rates fall enough to cover costs.

Measure: Months to payoff at the new rate and the old payment.

Try it in the calculator Enter its amount in "New rate, same payment". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Rolling costs into the loan raises the balance.
  • Resetting to a new 30-year term undoes the benefit unless the old payment is kept.

Who it fits

Average household, Married couples, Single, Grandmas and grandpas (62 and over), No high school diploma, No college degree, Newlyweds

Needs

Veteran with a VA loan

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: with an existing VA-backed loan, ask lenders for an interest rate reduction refinance loan.

Suppose it brings a new rate of 5.5% while they keep paying the old $1,896 payment. The loan would be paid off in 23 years 7 months instead of 30 years, saving about $147,106 in interest. To finish in five years, they would still need about $3,834 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Veteran stack: A lower rate at the same payment, then a lower escrow: many states give veterans a property tax exemption to file.
  • Military family stack: While on active duty, the 6% cap at the old payment; clear costlier debts; after service, a streamline refinance before the cap ends.

Sources and more information

Where to get help

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