The VA Cash-Out Refinance: What You Want To Know
The VA cash-out refinance is for Veterans who currently have a VA loan and want to take some of the equity in their home and convert it into “cash” for use of something else. There are really two kinds of “cash-out”: one is where you actually get cash at closing (in the form of a check usually) and other is where you don’t actually get the cash, but you take the money and pay off other debts that are not the VA loan that you are taking out.
VA Cash-Out Refinance Requirements
The VA cash-out loan is a full-documentation refinance (unlike the VA streamline refinance or VA IRRRL) and you will need to be ready to provide a full documentation package to the lender which in addition to the application can include things like:
- Bank Statements
- An appraisal
- Tax returns
VA Cash-Out Funding Fee: Higher Than a VA Streamline Refinance
When you do a VA cash out refinance, the VA funding fee is higher than the VA streamline refinance program – typically the funding fee for a VA cash-out refinance is 2.15% of the loan amount for an active duty service member or veteran with eligible service time. It is possible that this VA funding fee is higher if you have used the VA loan benefit before or if you are int he National Guard or the reserves.
Getting Cash at Closing or Paying Off Other Loans
In the event that you are thinking about doing a VA cash-out refinance and are planning on getting a check at closing to do anything you want with – you can expect to get a check at closing. Don’t expect anyone to come in with a suitcase full of money and hand it to you. The title company / escrow agent will simply hand you a check once the transaction is complete.
If you are simply paying off other loans that are not VA loans, expect them to get checks from the title company as well – and you may not ever actually see the check (the title company will mail it) or it is also possible that they will give you a check made out to the recipient for you to mail. The most common is for the title company to mail it.
VA Cash-Out Refinance: Up To 100%
In some cases, the VA cash-out refinance will allow the homeowner to go up to 100% of the homes appraised value – which means that if you do a 100% VA cash-out refinance, you will have taken all of the equity out of your home for other purposes. While this isn’t a bad thing per se – it is just highly advised that you explore all options before doing a 100% VA cash-out refinance.
VA Cash Out Refinance: Shop Lenders
There is one simple thing that you can do when thinking about a VA cash-out that will help you get the best deal – shop multiple lenders and get multiple rate quotes in writing. Free sites like VAMortgageQualify.com are free to consumers and can help match you with a VA approved lender who can help determine exactly how much you can save each month and how much cash you could possibly get. You may be surprised at how different each lender’s guideline overlays, rates and fees are. By getting multiple written quotes you can easily compare and make the best choice for your situation.