VA is one of the best loan programs available for Veterans to purchase a home with no down payment. But what many Vet’s don’t realize is that VA also allows for cash-out refinance up to 100% loan to value.
Types of VA Refinancing in 2023:
There are three basic VA refinance scenarios available to eligible Veterans today. First, there is the IRRRL or Interest Rate Reduction Refinance Loan. This refinance is specifically for those who already have a VA loan and are just looking to lower their interest rate. This is a “rate and term” refinance, meaning no cash is going back to the borrower. This is a great program because there is no appraisal and the program offers a very streamlined process.
The second type of VA refinance is someone who has a non-VA loan and is looking to refinance into a VA loan. This has been popular for those who wanted to refinance out of either an FHA loan or a Conventional loan with mortgage insurance. VA does not have monthly mortgage insurance (PMI) and allows refinancing to 100% LTV.
The third type of refinance is where the Veteran wants to pull some equity from their home. They may or may not already have a VA loan.
With interest ratesstill low and home values going up many Veterans are taking advantage and pulling cash out for making those home improvements they have wanted to make. Other reasons for pulling cash out include debt consolidation (credit cards) education costs, investments, etc.
Many VA lenders have their own “overlay” on top of the published VA loan guidelines, and as a result, many lenders put a cap on the loan to value for cash out at 90% of the home’s value. But there are a few VA lenders offering cash-out refinancing to 100% loan to value. *100% VA cash-out options are now available for up to $1mil loan amounts.
Some things to consider with a VA Cash out Refinance
Just because you have equity, doesn’t mean a VA cash-out refinance is the right thing to do. Unlike the VA Interest Rate Reduction Refinance Loan, which comes with a low VA Funding Fee equal to .5%, a VA cash-out refinance comes with a full 2.15% Funding Fee for first-time use, or a 3.3% Funding Fee for any subsequent use of eligibility. *See the newly updated chart below.
*100% VA cash-out options are now available for up to $1mil loan amounts.
The funding fee can be a significant amount added to the back end of the loan, so it’s important to have the VA mortgage specialist working with you to prepare a breakdown of the new loan amount, including the funding Fee, payment including taxes and insurance, closing costs and prepaid expenses, and an estimate of the amount of “cash” going to the vet after the closing of the refinance. For those Veterans who qualify for the Funding Fee waiver, a cash-out refinance can look a lot more attractive.
| Down Payment | VA Funding Fee | |
|---|---|---|
| First use | Less than 5% | 2.15% |
| 5% or more | 1.5% | |
| 10% or more | 1.25% | |
| After first use | Less than 5% | 3.3% |
| 5% or more | 1.5% | |
| 10% or more | 1.25% |
Source: The U.S. Department of Veterans Affairs website.
Note: Texas properties are not eligible for 100% cash out.
Questions? Please call us at Ph: 800-743-7556 or just submit the quick Info Request Form on this page and a VA loan specialist will contact you. We will be happy to review your situation with you and prepare a detailed cost breakdown.