VA Loan Cash Out Refinance
Although the cash-out refinance is much more involved than the VA Streamline, it’s the only one of the two that’s available to those with traditional, non-VA mortgages. In order to qualify for this VA home loan refinance, prospective borrowers will have to go through the standard credit and underwriting qualifying procedures, including evaluations of credit score along with credit history, debt-to-income ratio, appraisal, and income verification.
- The cash-out process is a similar process to what you went through on your first mortgage
- The new loan will be paying off your original loan amount
- Different debt obligation with different loan terms and payment amount
- Veterans can refinance up to 100% of their home’s appraised value on 1-unit primary residences up to the county loan limits for borrowers with full entitlement from VA
Officially referred to as an Interest Rate Reduction Refinance Loan, or IRRRL, the VA Streamline was created so eligible homeowners have the opportunity to lower their rates and decrease their monthly expenses. In order to qualify, you:
- Are required to have a VA loan currently
- Must receive lower interest rates and monthly payments after the refinance
- Unless the borrower is refinancing from an adjustable-rate mortgage into a fixed rate
- Have a minimum FICO score of 580 and a review of credit history
With a VA Streamline refinance, total costs are capped to keep the up-front costs as low as possible for the veteran. Another great benefit is not needing a home appraisal³ which helps keep your out-of-pocket costs low.
Disadvantages of VA Loan Refinancing
Although the pros far outweigh the cons, you should still be aware of any disadvantages associated with VA Streamline or cash-out refinancing.
- In some instances, refinancing may add more years onto your mortgage.
- For example, if you only had 15 years left of a 30-year mortgage, you may need to refinance for another 30-year term, effectively adding on an extra 15 years to your mortgage.
- Usually involves fees.
- Intended to reduce the loan’s cost to taxpayers, the funding fee is a percentage of your loan that’s calculated depending on the loan type and your military category. Although you have the option to finance the funding fee or pay it full in cash, the funding fee must be paid at closing.
As mentioned, these “disadvantages” are hardly disadvantages at all- especially since VA loans require no down payment² and no mortgage insurance.⁴
When to Refinance a VA Loan
The ultimate goal of a VA loan refinance is to help you meet your financing goal:
- Lowering interest rate
- Lowering monthly payment*
- Lowering the term of your loan
- Cash out for an emergency
Some of these options will also help significantly decrease the amount of interest you pay over the life of a mortgage.
If you think you’ll achieve this with a cash-out or VA Streamline loan, contact a HomeBridge Mortgage Loan Originator today for more information.
¹By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
²100% financing up to county loan limits may be available for purchase loans or 1-unit cash-out refinances. Cash-out not available in Texas. Minimum FICO score requirements apply.
³An Automated Valuation Method (“AVM”) is used to determine market value if the new loan amount is less than 125% Loan-to-value (“LTV”) as per the AVM. However, if the new loan amount exceeds 125% LTV, a full appraisal must be ordered.
⁴Most VA loans will require a funding fee.