VA Cash-Out Refinance Loans: Everything You Need to Know
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A Great Way for Veterans to Use Their Equity in Their Homes
- Roll your closing costs into the loan
- Finance up to 100% of the value of your home
Today's VA Cash-Out Rates
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What is the VA Cash-Out Program?
If you’d like to take advantage of your home’s equity to access cash for home improvements, pay off high-interest debt or manage any other expenses, a VA Cash-Out Loan may be just what you’re looking for. Any qualified veteran homeowner, regardless of whether they have a FHA, USDA or conventional loan, may be eligible for this program.
One of the most common reasons why veterans choose a VA Cash-Out Loan is for greater flexibility in consolidating debt. For instance, if you’re paying a high-interest rate on credit card debt, a VA Cash-Out Loan is often a way of paying off that debt at a significantly lower rate. Unlike credit card debt, the interest on your VA Cash-Out Loan is tax-deductible, which could save you even more money.*
Additionally, consolidating your debt at a lower, more manageable rate, can often be the first step toward repairing your credit. Even if you’re consistently making the minimum payments on your nearly maxed-out credit card, your credit score could be suffering due to your outstanding balances.
*Consult a tax adviser for further information regarding the deductibility of interest and charges.
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What is the VA Cash-Out Refinance Program?
Veterans who would like to refinance their mortgages into a low rate while getting cash out of the equity in their homes may be eligible for the VA’s Cash-Out Refinance program. While the Department of Veterans Affairs doesn’t lend money directly to veterans, they do guarantee the loans, which allows lenders like Pennymac to offer them directly.
A VA Cash-Out Loan is fundamentally different from a standard home equity loan, which is a second lien against your property. With a VA Cash-Out Loan from Pennymac, you’re essentially replacing your existing mortgage with a new loan that allows immediate access to cash, using your home equity, with easy fixed-rate monthly payments. This means that your overall risk is lower with a VA Cash-out refinance than with a traditional loan.
If you’re considering a home equity line of credit (HELOC), there are some good reasons to consider VA Cash-Out. For example, if you’re worried that rates may increase in the coming months and years, a fixed-rate VA Cash-Out Loan may be preferable to a HELOC with unpredictable variable rates.
Why Choose a VA Cash-Out Refinance?
Are you interested in paying off high-interest debt, going back to school, or getting a little help managing additional expenses? A VA Cash-Out Loan may be your best way to convert your home’s equity into cash for a variety of needs. Many homeowners are surprised to learn how much equity they have in their home and how now may be an opportune time to consider a VA Cash-Out Refinance.
A few ways VA Cash-Out Loans help veterans include:
- Paying off high-interest debt
- Converting a non-VA loan to a better rate and term
- Interest is tax-deductible when compared to credit card debt*
- Eliminating lingering tuition-related debt
*Consult a tax adviser for further information regarding the deductibility of interest and charges.
More About the VA Cash-Out Refinance
Borrowers who already have a VA loan will find the Cash-Out Refinancing process to be relatively similar. Like a VA purchase loan, you will have to go through standard credit and underwriting evaluations. Pennymac typically requires a minimum credit score of 620 for the Cash-Out benefit.
That means that, if you bought a home for $200,000 and it’s now worth $250,000, you may be able to refinance up to $225,000.
The VA Cash-Out Refinance requires that you already have a mortgage on your property. If you own your home free and clear and no longer have a mortgage, you will need to explore other options for getting access to your equity.
A common misconception is that only veterans with current VA loans can get a VA Cash-Out Refinance. The reality is that even if you have a conventional, FHA or USDA loan, a VA Cash-Out Refinance may be an available option for you if you meet the basic requirements. Compared to many other kinds of loans, the VA Cash-Out is often preferable to veteran borrowers because it’s often offered at a lower rate when compared to a conventional cash-out loan, and you have the option of repaying the loan over a longer period of time.*
You should also know that even with the VA cash-out program, you will need to pay closing costs on the loan. You may also need to pay a VA cash-refinancing fee as well.
*By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
Am I eligible for Cash-Out Refinancing?
If you were eligible for a VA Purchase Loan, you probably meet the requirements for a VA Cash-Out Refinance Loan. The basic requirements for a VA Cash-Out borrower include:
- Honorably discharged veterans, including veterans of the Reserve and National Guard
- Active duty service members
- Current Reserve and members of the National Guard (typically 6 years of service is required)
- Unmarried surviving spouses
- Commissioned officers of the Public Health and National Oceanic and Atmospheric Administration
- Any veterans that have not been dishonorably discharged
A Certificate of Eligibility (COE) is required from all VA borrowers, which Pennymac can provide for you. Some eligible veterans may need to provide a valid DD-214, which is your certificate of release or discharge from active duty.
Wrapping it Up
If you feel like a VA Cash-Out Refinance is the right option for you and you meet the qualifications, consider Pennymac as your lender. We offer low rates and experts who can walk you through every step of the refinancing process. Create an account to start the application, or talk to one of our experts!
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