23 Dec What Is A VA Cash Out Refinance Loan?
A VA cash-out refinance loan from the Department of Veterans Affairs (VA) gives homeowners to cash in exchange for their home equity. As you might expect, it’s a valuable tool that allows veterans and active military personnel to quickly and easily obtain funds or financing.
Continue reading to learn more about refinances and determine whether a VA cash-out refinance is right for you.
What Is A VA Cash Out Refinance Loan?
Veterans, active duty military members, and surviving spouses who meet the requirements can obtain a loan for up to 100% of the home’s appraised value through a VA cash-out refinance, or “refi.”
The VA program offers loans that can be used to refinance non-VA loans into VA loans, pay off liens and debt, renovate homes, and more (which often comes with better terms attached than a conventional loan).
In essence, a VA cash-out refinance loan enables you to refinance your existing mortgage into a government-backed loan or convert home equity into cash, which you can then use to settle other debts.
How Does It Work?
VA loans have a lower overall risk to lenders since the federal government backs them. In other words, borrowers who get money from these programs can access financing with better loan terms.
Applying for a VA cash-out loan follows a similar procedure to apply for a traditional loan. The first steps are researching lenders, reviewing loan requirements, comparing each lender’s terms, choosing a financial institution to deal with, and filing a loan application.
Eligibility Criteria For VA Cash Out Refinance Home Loans
To begin with, you can enter the program without having a current VA loan. You can get funding for a VA cash-out loan regardless of your conventional mortgage (15-year, 30-year, adjustable-rate (ARM), etc.).
You must be qualified for the program; only a select group of people do. The following are the minimum conditions that applicants must meet to be eligible for a VA loan:
- Served for a minimum of 24 months in a row on active duty or was deployed for 90 days
- Activated for at least 181 days before August 1, 1990.
- Provided they have completed at least 90 days under Title 10 or Title 32, with at least 30 of those days being continuous, or six years of creditable service in the Reserves or National Guard.
- If you were medically released, the service time requirements might be waived.
- A service member’s surviving spouse who died while doing their job
VA Cash Out VS VA Streamline Refinance Loan
The sole choice for people who don’t already have a VA loan is a VA cash-out refinance. If you already own a VA loan, you might want to consider a VA streamline refinance, or an interest rate reduction refinance loan (IRRRL), which can help you lower your interest rate or lengthen your payback period. You can get a VA streamline refinance loan for up to 120% of the current value of your house through a streamlined lending process that helps save time and money.
Additional benefits of an IRRRL include a reduced, one-time VA financing fee instead of a monthly mortgage insurance fee. This cost, which amounts to about 0.5% of the overall loan amount, may be included in the loan or paid in advance. For those receiving VA benefits, those applying as the surviving spouse of a Veteran who lost their life in service (or as a result of a disability-related to that service), or Purple Heart recipients serving in an active duty position, the financing fee may be waived.