9 Key Takeaways From The VA Cash-Out Refinance Loan
VA-backed refinance options are gaining popularity with qualified borrowers looking to explore lower interest rates, take cash out of their home’s equity, or simply refinance a non-VA loan into a VA-backed loan. The VA Cash-Out refinance loan offers many advantages of the VA loan program. It might prove ideal for veterans who want to refinance their current mortgages and take advantage of any of the scenarios above. You’ll want to keep these nine takeaways in mind if you’re considering refinancing your existing mortgage.
Your Home’s Equity Equals Cash
The VA Cash-Out refinance loan allows qualified veterans to refinance their VA or non-VA home loans at a lower rate while tapping the equity available in their homes. However, don’t confuse the VA Cash-Out with a home equity loan, a second loan you take out against the property that essentially leaves you with two mortgages. The VA Cash-Out refinance loan replaces your existing mortgage altogether.
- The VA Cash-Out refinance typically comes with more flexible credit requirements.
- The VA Cash-Out refinance lets qualified veterans take advantage of lower interest rates, translating to lower monthly payments.
- The VA Cash-Out refinance eliminates private mortgage insurance.
- The VA Cash-Out allows most homeowners the ability to repay the loan over a longer period.
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Your Current Loan Doesn’t Have To Be a VA Loan to Qualify
VA Cash-Out refinance is available to any qualified veteran regardless of their original mortgage loan type. Homebuyers can refinance conventional, FHA, USDA, or VA loans using the Cash-Out option.
You May Be Able To Refinance 100 Percent Of Your Home’s Value
Under new VA lending rules, veterans can use the VA Cash-Out to refinance up to 100 percent of a home’s appraised value. Note that in some cases, the maximum percentage that homeowners can refinance is lower.
Standard VA Loan Processes Apply
For a cash-out refinancing, you generally need to meet the same requirements as for a VA loan. VA Cash-Out refinance loans follow the standard VA loan credit and underwriting processes, and the lender will order a home appraisal. The amount you’re allowed to refinance hinges on the current home valuation.
No Out-Of-Pocket Closing Costs And VA Funding Fee
If you choose, you can roll the closing costs and VA funding fee into your loan amount as long as you meet the lender loan-to-value guidelines.
You May Not Be Required to Take Out Cash
Not everyone who refinances does so to extract cash. Suppose you’re a qualified veteran seeking to refinance a non-VA loan into a VA-backed loan to take advantage of lower rates or to get out from under an adjustable-rate loan or simply eliminate mortgage insurance. In that case, a VA Cash-Out may be your answer since you have the option not to take out any cash.
You Must Live On The Property
The home you’re refinancing must be your primary residence. In other words, you have to occupy this home full-time; it can’t be a vacation home or an investment property.
The VA Won’t Restrict How You Use Your Cash
The Cash-Out refinance provides access to the equity you’ve built up in your home, and the VA won’t restrict how you choose to use your money. So, go ahead and consolidate or pay off those debts, add an extra room to your house or fund your education. Your money, your choice.