VA Cash-Out Refinance Loans
There are many government programs to aid and benefit the men and women who have served in our armed forces in order to protect the citizens of this country, and among them are several offered by the Department of Veterans Affairs (VA) that can assist eligible veterans and service members in the home buying process. But if you are a veteran who already owns a home and are looking to tap into the equity you’ve built up so far, a VA cash-out refinance loan might be just what you were looking for.
Tap Into The Equity Of Your Home
A VA cash-out refinance loan gets homeowners cash in exchange for their home equity, and can be incredibly useful for qualified veterans and military service members who are looking to access capital or financing on-demand to utilize however they may need.
A VA cash-out refinance – also known as a “refi” – enables qualified veterans, active-duty service members, members, and surviving spouses to get a loan up to the equivalent of 100 percent of the appraised value of their home.
Money obtained via this VA program loan can be utilized however the borrower wishes, such as for making home improvements, paying off liens and debt, or refinancing a non-VA loan into a VA loan, which typically offers superior terms over most conventional loans.
At the end of the day, a VA cash-out refinance loan enables qualified borrowers to replace their current mortgage with a government backed loan, or to transfer their home’s equity into cash that can be used for paying off debts, making repairs or upgrades to your home, or any other purpose.
VA loans present lower overall risk to lenders since they are backed by the federal government, which allows them to offer more favorable loan terms to borrowers than conventional loans. For example, rates on VA cash-out refinance loans are normally lower than the interest rates offered by other types of refinance loans.
On the surface, applying for a VA cash-out refinance loan isn’t much different than applying for a conventional loan; the steps involved are typically very similar between the two, including researching lenders, reviewing loan conditions, selecting a financial institution to work with and finally submitting a loan application.
A common misconception about VA cash-out refinance loans is that you need to already hold an existing VA loan to qualify; however, this is not true. No matter what kind of conventional mortgage you may have – be it a 15-year, 30-year, adjustable-rate, etc. – qualified borrowers are able to apply for a VA cash-out loan and tap into the equity of their home.
Eligibility for the program depends on several factors, and not all applicants may qualify. To satisfy the minimum service requirements necessary to obtain a VA cash-out refinance loan, applicants must adhere to the following:
- Have served on active duty for a minimum of 24 continuous months, or mobilized for 90 days
- Mobilized before August 1, 1990 for a minimum of 181 continuous days
- Served 6 creditable years in the Reserves or National Guard, or at least 90 days – with a minimum of 30 consecutive days – under Title 10 or Title 32
- Have been discharged under honorable conditions
- If you were medically discharged, service time requirements may be waived
- If you are the surviving spouse of a service member who died in the line of duty
If you meet any of the aforementioned requirements, you will need to provide your lender with a copy of a Department of Veteran Affairs Certificate of Eligibility (COE) to confirm this.
Other requirements will be presented by your lender, including meeting a minimum credit score and standards for debt-to-income ratios. Also, the home that you are refinancing must be your primary residence; a VA cash-out refinance loan cannot be used for a vacation home or other such property.
Since VA cash-out refinances are less risky by lenders due to the fact that they are backed by the Department of Veterans Affairs, they will typically offer lower rates when compared to cash-out refinances on conventional home loans. However, you may still be liable for closing costs such as appraisal fees, loan origination fees, and title insurance at the time that you close on a VA cash-out refinance. You may also be required to pay a VA cash-refinancing fee.
If you are a veteran or service member with a conventional loan, your only option is a VA cash-out refinance; however, if you already have an existing VA loan, you will also have the option of utilizing what is known as a VA streamline refinance, also known as an interest rate reduction refinance loan (IRRRL). This can help you lower your interest rate or extend your repayment term, and can be obtained for up to 120 percent of the value of your current home.
A VA cash-out refinance loan is a great opportunity for eligible veterans and service members to utilize government programs to tap into their home’s equity to help put money in their pocket, fund repairs and renovations, save for retirement, or cover other expenses, all while typically acquiring better terms when compared to conventional loans.