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VA Cash Out Refinancing Loan Purposes: A Reader Question

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A reader asks, “I am interested in the Cash-out Refinance Loan. I’m a Veteran but never used VA Loan. I’m a homeowner still paying mortgage. I understand that I can apply for the VA’s Cash-out Refinance Loan to take care of paying off my other debts like credit card. Is this correct? Or is this program designed only to refinance a non-va loan into a VA loan?”

“I have huge credit card balance that I want to pay-off using VA loans. Is this possible?”

The VA Cash-Out Refinancing Loan can indeed be used for paying off credit card debt if that is a purpose acceptable to the lender, but borrowers should be sure they understand the nature of VA cash out refinancing loans before deciding to apply for one with such a purpose in mind. Why?

VA refinancing loans that feature cash back to the borrower require the original mortgage loan and any associated fees and expenses. Once the original mortgage is paid in full, any remaining cash not used to cover loan expenses is permitted back to the borrower.

That’s the detail you should know when applying for the loan–the cash back to the borrower comes after the other items have been paid. A borrower should discuss the current amount due on the mortgage loan with the lender and see how much money would come back to the borrower once all required payments have been taken off the top.

That amount could be affected by a variety of factors including the appraised value of the home and how long the borrower has had the original mortgage.

A borrower who hasn’t made many house payments on the original loan may be required to wait out a “seasoning period” before applying for a refinancing loan. In general terms, you may have to wait six months but the lender requirements may also factor into the amount of time you’ll need to wait.

Discuss your specific needs with a loan officer to get a better idea how a VA cash-out refinancing loan might work best for you based on your financial needs and goals.

Do you have questions about VA home 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.

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