The Complete Guide To The VA Cashout Refinance Loan
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Mortgage rates are hitting new record lows. If you are a veteran, now may be a good time to get a VA Cashout Refinance loan. In this post, I'll tell you all about what this loan is and how it works.
Note: If you just want to just pay off an existing VA Mortgage loan and get a better rate without taking cash out, check out the IRRRL post instead.
The VA Cashout Refinance loan is a mortgage program that allows you to take cash out from your home's equity. You can borrow up to 100% of the property value if certain requirements are met.
You can use the funds for anything you wish when borrowing at 90% of the property value. Some of the common uses include:
- Getting a lower rate
- Converting a conventional loan to VA
- Home improvement projects
- Paying off high interest credit cards and personal loans
- Paying for a wedding
- Paying for a dream vacation
- Buying a car
Net Tangible Benefit Test
In certain cases, the VA allows you to borrow as much as 100% of the property value but the proposed new VA Mortgage loan must pass a "net tangible benefit" test .
To pass the net tangible benefit test for 100% financing, the proposed new VA Mortgage loan needs to meet one of the following:
- The new VA loan eliminates monthly mortgage insurance
- The term on the new loan is shorter than the loan being refinanced
- Bills are being consolidated, which increases your total cashflow
- The new VA loan replaces an interim loan to construct, alter or repair the home
- The new VA loan refinances an adjustable rate loan to a fixed rate loan
If none of the above benefits are realized in the new VA Mortgage loan, cash out is still an option, but keep in mind that you are limited to 90% of the property value. For 90% cash out VA Mortgages, there are no limitations to what can be done with the funds.
You will need to pay the funding fee (typically the subsequent use rate of 3.3%). If you are exempt from the funding fee due to service related disabilities, then the funding fee will also not be due on the refinance.
Keep in mind that the funding fee is taken out of the available funds for the refinance. For example, if you are refinancing a home that appraised for $100,000, the funding fee of $3300 (3.3%) would be taken out, and then the remaining $96,700 would be available for whatever else is needed.
Why Use Me For Your VA Cashout Refinance Loan
You have a lot of choices when deciding which loan officer to use for your IRRRL mortgage loan. If you are in Ohio or Kentucky, here are a few reasons you should consider me to be your mortgage loan officer for your VA Cashout Refinance.
The VA Cashout Refinance is a great way for veterans to take advantage of their home equity to pay off some bills and live a better life. If you have any questions about this program, do not hesitate to reach out to me at 937-572-3713.