VA refinance

VA Cash-Out Refinance Loan Options

February 7, 2013

VA Cash-Out Refinance Loan Options

It’s easy to assume the wrong things about VA refinance loans, but once you understand the rules for programs like VA cash-out refinancing, it’s easy to see what your options are for a refinance loan.

For example; VA cash-out refinance loans are the option VA borrowers can use to refinance VA or conventional loans. VA Interest Rate Reduction Refinance Loans can’t be used for conventional or FHA mortgages, nor do they feature cash back. VA cash-out refinance loans are more flexible in these areas.

Here’s what the VA says about cash-out refinance loans:

“A cash-out refinancing loan is a VA-guaranteed loan that refinances any type of lien or liens against the secured property.  The liens to be paid off may be:

  • Current or delinquent, and
  • From any source, such as
    • Tax or judgment liens, or
    • VA, FHA, or conventional mortgages.”

The procedure for paying off a current loan with VA cash-out refinance loans is different than managing a delinquent mortgage, but the option is definitely there. The cash-out option comes into play once the borrower has satisfied the original mortgage. According to VA Pamphlet 26-7, “Loan proceeds beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower for any purpose acceptable to the lender.”

The last line is important–the borrower and lender must come to an agreement on the acceptable uses of any cash back. In the case of fees, discount points and other charges, the VA loan rules permit these items to be paid using cash back.

The VA IRRRL, by comparison, is only for VA mortgages, and as previously mentioned, won’t allow cash back to the borrower. But the IRRRL definitely has its place–borrowers looking for a lower mortgage loan rate or monthly payments should definitely consider one. Something both types of VA refinance loans have in common? They both permit the inclusion of extra funds for VA approved energy-efficient improvements to the home.

Do you have questions about VA home loans or refinancing loans? Ask us in the comments section.

 

Bruce Reichstein

About Bruce Reichstein

Bruce Reichstein is an Expert on (VA) Military/Veteran Home Loan Guidelines for over 26 years. He is an experienced VA Loan Mortgage Banker who is passionate about assisting US Military Veterans utilize their Veteran Eligibility to purchase a home.

One Comment
  1. SFC Matthew Carley

    So I have a few questions about a VA Refi. I currently have a FHA 4.5% 30 year fixed mortgage on my home in Colorado that I originally purchased with a 203K rehab mortgage in 2011. I owe 177K on my home and after the initial remodel it appraised at 239K in early 2012. I am interested in refinancing with my VA cert so that I can drop PMI and take advantage of the current lower interest rates but I would also like to be able to access some of the current equity in my home to complete a master bath room remodel that had to be taken out of the original remodel as well as take care of some landscaping. Is there a VA loan product that will meet my needs? Respectfully, SFC Matthew Carley

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