Refinancing with a VA Loan
Refinancing a VA loan falls into one of two categories: those seeking better loan terms & those seeking cash-out. What’s the difference? Put simply, it comes down to whether your goal is to obtain better terms on your mortgage (a lower interest rate and/or lower monthly payment, for example) or if your goal is to refinance your loan and raise some funding (thus cashing out, so to speak).
A cash-out refinance is a form of mortgage refinancing that results in a higher total mortgage balance, but with the benefit of that higher rate resulting in a portion of cash being released to the veteran or service-member doing the refinancing. The additional funds can be used towards, really, any project you desire. Common purposes, though, include furnishing or remodeling your house, purchasing new appliances or repairing the property, or paying off existing debt.
A more traditional option, however, would be refinancing your existing mortgage with the goal of lower interest rates or payments. This is often referred to as an IRRRL (Interest Rate Reduction Refinance Loan). Generally these types of refinancing options don’t require a new appraisal, and often times closing costs can be included in the loan’s completion.
The takeaway here should be that refinancing with a VA loan can result in cash-out for multiple purposes or reduction in your monthly payments and mortgage interest rate. If you qualify, why not pursue it?