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A unique refinance option, the VA Cash-Out Refinance lets borrowers convert non-VA loans into a VA loan, or refinance a VA loan while withdrawing cash from your property’s equity. At the same time, the cash-out refinance can lower the loan’s interest rate, even if it was a non-VA loan previously.
Cash-out refinance differs from a home equity loan. The latter exists in addition to the mortgage, while a cash-out refinance replaces the existing loan altogether. For qualified homeowners, it’s possible to refinance 100 percent of the property’s value in some cases. Talk with a lender about their specific guidelines.
Homeowners who want to take out cash often use the money for home improvement, debt payment or other obligations.
For homeowners refinancing a non-VA loan into a VA-backed loan, it is not necessary to take out any cash. That means you can have a conventional, FHA or USDA loan and basically bring it into the VA loan program. These homeowners will also go through the same process as if they were homebuyers seeking a VA loan. Credit, income, employment, debt and other details will need to satisfy a VA-approved lender. A VA appraisal is required, too.
For current VA loan borrowers looking to refinance, the VA funding fee increases to 3.6 percent of the loan value in most cases. That sum is not due at closing. Instead, lenders can fold that fee and closing costs into the entire loan amount. For first-time VA loan users, the funding fee is 2.3 percent in most cases. If you get compensation for a service-connected disability or you are a Purple Heart recipient you typically don’t have to pay this fee.
Another thing that Cash-Out refinances require is occupancy. Veterans looking to get a VA Cash-Out have to intend to occupy the property as their primary residence. So, generally, you could not look to a Cash-Out refinance for a property you’re no longer calling home. Talk with lenders in more detail about your specific occupancy situation.
The state of Texas does not currently allow for Cash-Out refinancing loans. If you want to refinance a property in Texas, you can talk with a mortgage lender in more detail about your options.