VA Cash Out Refinance

What Is A VA Cash Out Refinance

The VA Cash-Out Refinance is a VA mortgage that permits the veteran to refinance your existing mortgage into a what’s usually a more attractive VA loan, while converting some of your home’s equity into cash. It’s important to note that your existing loan does not have to be a VA loan. This is NOT a second trust deed or home equity line of credit. The VA cash out refinance loan replaces your existing first deed.

What’s exciting is the versatility of the loan. Veterans can use a VA cash-out refinance for a number of purposes, including:

  • Cash out some of your equity to consolidate debt and lower your monthly payments.
  • Pay medical bills or college tuition.
  • Take advantage of lower interest rates.
  • Mover from an Adjustable Rate Mortgage to a Fixed Rate Mortgage.
  • Change from a 30 year mortgage to a 20 year or 15 year mortgage (enabling you to build equity much faster).
  • Make some home improvements.
  • Payoff a construction loan relative to home improvements already made.
  • Increase your monthly residual income (what’s left after all your bills are paid).
  • Take that long desired vacation, or start a business.
  • Convert from a Conventional, FHA, or USDA mortgage, to a VA loan to eliminate expensive mortgage insurance (this can save you hundreds monthly).
  • Payoff a first and second mortgage to have one low rate VA loan.
  • Obtain cash out to handle some of life’s emergencies, make a major purchase, or just put it in savings

From A Practical Real Life Perspective, How Much Can This Loan
Really Help Me?

In the latter portion of 2019 a past client referred a couple to us. They were drowning in debt, and the husband was concerned that his security clearance might be in jeopardy. Their revolving and installment debt, including student loans, totaled over $134,000. Luckily he was a veteran, and the home they purchased in early 2016 had appreciated in value significantly. They applied for a VA cash-out debt consolidation mortgage. We were able to maximize their capital by retiring $88,301 in debt. We also lowered the interest rate on their mortgage from 4.25% to 2.75% (3.096% APR), lowered their total monthly payments by $2,886.96 (from $8,082.04 to $5.195.08). and lowered their stress level from Code Yellow to Code Green. See Table 1 Below. That’s the potential of a VA cash-out refinance to help you.

A Few Things To Consider About VA Cash Out Loans

  • The process for obtaining a VA Cash Out refinance is comparable to the process you’d follow to get a typical VA purchase loan. The underwriting guidelines are similar, including credit evaluation, appraisal requirement, income verification, etc. To review requirements for the VA Purchase Loan, click here.
  • You’ll have to certify that you intend to occupy the property.
  • You can typically cash out 90% to 100% of your home’s equity.
  • You can finance your closing costs into the new loan amount, subject to maximum loan-to-value restrictions.
  • Closing costs and fees can typically vary from 2% to 5% of the loan amount.
  • The VA Funding Fee may also be financed into the new loan amount, subject to loan-to-value restrictions.
  • The VA Funding Fee is 2.3% for first-time users, and increases to 3.6% for subsequent use. The Funding Fee is paid to VA at closing to support the VA Home Loan Program by helping lower the cost of the loan for the U.S. Taxpayers. PLEASE NOTE: If the veteran receives compensation for a service-connected disability they are exempt from the Funding Fee. In addition, if the veteran died in service, or from a service-related disability, their surviving spouse may also be exempt from the Funding Fee.

Frequently Asked Questions About VA Cash Out Loans

I bought a home with a VA loan. How long do I have to wait to get a VA Cash Out refinance?

VA requires that the loan be seasoned (on the books) for 210 days, calculated from the due date of the first payment to the closing date of the new loan.

What are all the costs associated with VA Cash-Out refinance?

From a rate perspective, interest is market driven and changes daily. But VA loans tend to have rates among the lowest in the marketplace. VA caps origination points at 1% of the loan amount. The appraisal fee is set by VA. The homeowner can shop for the best deal on third party services (escrow, title, termite, etc).

How long does it take to close a VA Cash-Out refinance?

Anywhere from 19 – 60 days. This largely depends on whether you have ALL necessary VA paperwork, and how quickly the VA Appraiser can complete the appraisal assignment. These turn around times can change from day to day. Please call us to get more information.

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