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A recent client had purchased a home with a VA loan at 2.375%, what a great rate. It is hard to imagine a situation where we would want to increase the interest rate into the high 6's - that seems crazy, but here is a perfect example of looking at the big picture and not being focused on just the rate.
My recent clients had done some home improvements and the interest only loans were coming due so we wanted to pay off those high interest rate loans as well as some other debt. The interest rates on the other debts was in the high teens and some even over twenty percent interest rates. With that in mind the best option was to use the equity in the house to help pay off those high interest rate loan.
VA loans allow for veterans to take cash out up to 100% of the value of the property. This is much higher than other loan programs, and give veterans a great opportunity.
We had a few hurdles to overcome as our credit score was below 620 and the value of the house came in a little lower than we had hoped for.
Our original estimate had them bringing over $9000 to closing and increasing their interest rate in order to meet our goals, not the best game plan for my clients.
In order to provide the best play possible, I rearranged some of the debt we were paying off to maximize our savings with the equity that we have to use.
The clients got to miss two house payments, and will receive and escrow refund of about $2800. That turned out to be about a $7500 swing in savings!
Oh and remember that original estimate of bringing over $9000 to closing to get this all done?
That is a winning game plan!
