VA Homeloans & Refinancing

My husband and I purchased our first home in 2009 with a VA Home Loan, with an interest rate of only 5%! At the time, that was a fantastic interest rate and we bragged about it to all of our friends and family. While many people were qualifying for first time home-buyer credits and using all sorts of incentives to make their down-payment affordable, we didn't have that problem. We were presented with the option to buy the house we were renting on December 31st and walked out of our closing on April 9th.

Approximately one year later, the interest rates fell...and we received a flood of REFINANCE NOW! letters and postcards in the mail from all sorts of lenders. At first, we thought they were scams. Yeah, we're a bit cynical.

When retirement is on the horizon, you might be excited about the increased free time you will have. What may not excite you is that you will have less money to spend. When you need extra funds, your home is a good resource. Tapping into that resource by learning how a reverse loan works and applying for one is a way to protect yourself and enjoy your retirement. It differs from a standard home loan because it is a long-term agreement. You don't need to pay any funds back initially. You also will not receive monthly bills. In fact, you will receive monthly checks from your lender, instead. At least, you will until funds run out, if you select that payment option. You could also opt for a line of credit or single large payment. In any case, it is only when you leave the property or otherwise violate the reverse mortgage agreement that you will owe the balance.

Then I heard about a friend - a friend with two mortgages and caught up in the real estate bust - that did a VA mortgage refinance through one of the companies that had contacted him. He actually reduced one of his mortgages - the one that was hurting his finances - by $600 a month! He sent me an email and told me a little bit about the process and VA loan funding fee. It seems too good to be true but I think that we are going to try it and see what happens!

Taking out a loan against the equity in a home is a common practice for retirees. If you are trying to get a reverse mortgage to give you extra money during retirement then you will have to talk to lenders and determine which one has the best loan policies. When you discuss loan terms with reverse mortgage lenders, keep in mind that the interest rates when borrowing money in such a way can be quite high. Also, reverse loans of that sort generally cannot be renegotiated or refinanced in any way. Therefore, when the balance comes due, which will be upon your death or when you choose to move out of your home, you or your heirs may find that the balance due is higher than expected.

Has anyone else done this? What were your results?