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VA Loans, Cash-Out Refinancing And Debt Consolidation

Some borrowers ask about “VA debt consolidation loans”, hoping the VA offers a loan guaranty program to help them put their monthly obligations under a single loan. While the standard response to this question is that the VA loan program is for real estate purposes only, there may be an alternative for qualified borrowers.

VA cash-out refinancing loan rules include a statement about how the money from such a loan can be used. According to the Department of Veterans Affairs, the proceeds from a VA cash out refinancing loan can be used for any purpose “acceptable to the lender”. That purpose could include debt consolidation, provided the lender does not prohibit such uses.

Is such a purpose for the loan realistic? Much depends on how much cash back is due the borrower after the refinancing is complete.

As mentioned above, the Department of Veterans Affairs doesn’t guarantee debt consolidation loans but money from a cash-out refinancing loan could be helpful in situations where the borrower needs extra cash to eliminate or consolidate debts. VA Cash-out refinancing requires a credit check and the usual forms of underwriting, and not all borrowers are eligible for this type of loan.

According to a VA Cash Out Refinancing pamphlet distributed by the Phoenix Regional VA Loan Center, borrowers approved for this type of refinancing “can get cash back and obtain a loan for 100% of the current appraised value.” Cash out refinancing is available to borrowers who don’t have equity built up in the property, “…as long as you do not exceed 100% of the¬† current appraised value.”

What type of loan is a VA Cash-Out Refinance for? “You can refinance an existing VA, FHA, or Conventional loan or any other additional¬† debt that may exist on the property.”

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About Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.

2 Responses to VA Loans, Cash-Out Refinancing And Debt Consolidation

  1. Nate Jaeger says:

    I am being told by my lender that a va cash out loan requires a termite inspection and repairs by the va to guarentee the loan. Is that true or is it the lender who is requiring it???

    Thanks

    Nate jaeger

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