Posted on: October 1, 2018
The VA cash out refinance program is popular with Veterans who want to tap into their home’s equity and maybe even lower their interest rate, too.
Qualified veterans can use cash proceeds from their refinance to make home upgrades, pay down high-interest credit cards, or take a vacation. Low interest rates and flexible payment terms make it a great time to invest in your home and use equity to pay off other expenses.
A VA cash out refinance loan allows veterans to do one or both of the following:
1. Open a loan that is larger than their current one, and receive the difference in cash, or
2. Pay off a non-VA loan.
Most cash-out applicants want to get a large lump sum of cash for home improvements or any other purpose. But many others have a non-VA loan, such as conventional or FHA. The new VA loan eliminates mortgage insurance.
In some cases, you the lender will allow you to refinance up to 100% of the value of your home (100% LTV) with a VA cash out.
VA cash out refinance requirements are fairly similar to those of VA loans to buy a home. First, an applicant must meet VA home loan eligibility requirements. Eligibility can be established for:
VA cash out loan applicants will submit a Certificate of Eligibility (COE) which the lender can obtain for you fairly quickly. Have a valid DD-214 ready in case the lender needs it. If you are uncertain if you qualify, call (866) 240-3742 to speak with a licensed lender who can answer your questions and help you apply.
The application process is easy. To get started call (866) 240-3742 to speak with a knowledgeable mortgage professional. Or, simply fill out a short form here. From there, your licensed VA loan expert will guide you through the process.
Here are a few things your mortgage professional will help you determine:
A VA cash out refinance is different than the VA streamline refinance. Compare the differences with this chart:
VA cash out compared to VA Streamline Refinance
|VA Streamline Refinance||VA Cash out Refinance|
|Cash Out Allowed||No||Yes|
|Can Combine 1st and 2nd Mortgage||No||Yes|
|Maximum Loan to Value (LTV)||No Maximum/Not Verified||100% in some cases|
|Maximum Loan Amount||Current Loan Balance plus Closing Costs||$721,050|
|VA Funding Fee||.5% (unless exempt)||2.15-3.3% (unless exempt)|
|Mortgage Lates Allowed In Last 12 Months||1 (30 days)||0|
|Property Must Be Owner Occupied||No||Yes|
Perhaps the most notable difference between these two programs is that the VA cash out loan has a maximum loan-to-value of 100%, but there is no maximum VA streamline refinance LTV. This is because the VA streamline does not require an appraisal, so current value is not determined. An appraisal and value are required for a cash out refinance.
The VA cash out program follows the same maximum lending limits as the VA loan to purchase a home. The standard limit is $453,100 but can go much higher in high-cost areas.
For an in-depth look at VA loan limits, see our VA loan limits page.
The amount of money that you can receive from your loan depends on your current home value and specific lender. Keep in mind that some lenders will only allow you to take up to 90% of your home’s current value. If you need 100%, shop around until you find the right lender that will extend the loan amount that you need.
If you are interested in saving money with a VA home loan refinance but aren’t interested in the cash out option, visit our VA Streamline Refinance page for more information on the other types of loan refinances that are available.
Source: VA Handbook