You may have heard of people taking out a second mortgage on their house to get cash to help pay bills, send a kid to college, or make home improvements. The VA's Cash Out & Refinance option is similar to a second mortgage but a much better deal.
The program is similar because it gives you cash based on the equity in your home, but the similarity ends there, instead of having 2 mortgages, one on the original value and one on the equity, you will just have one mortgage for the entire value of your house. This usually gives you a lower interest rate - at least 2 - 3% lower than a 2nd mortgage - and makes your monthly payments and tax prep much easier.
Equity is the value of your ownership of your home. For example, if you bought your house for $175,000 and have been making payments so that you only owe the bank $125,000 you would have $50,000 equity. Likewise, if you bought a house for $200,000 and it is now worth $220,000 due to and improved housing market, you would have an equity increase of $20,000.
The cash out & refinance option can give you cash based on the your equity. For example, if your home is worth $200,000 and you owe $100,000 on your loan you can get a new VA loan for $200,000, pay off your first $100,000 loan and pocket the remaining $100,000. You can refinance an existing VA loan or a non-VA loan.
You must find your own lender, pay all fees, and provide all necessary paperwork, just like getting a first mortgage. You will also need a valid VA Loan Certificate of Eligibility.
Yes, there is a bit of work involved in the VA Cash Out & Refinance Loan, however it could possibly save you thousands every year over a 2nd mortgage and give you much needed cash, should you need it.
How Do I Get Started?
As with most big financial decisions, the first step is gathering information and shopping around. We'll help you get the process started by matching you with up to five rates from five lenders, ensuring you find a great fit.