VA Cash Out Refinance
:: “…VA Cash Out Refinance ”
VA Cash Out Refinance – As a Veteran you may use your VA loan to get “cash out” of your existing VA mortgage. Keep in mind, the cash out option is NOT available through the IRRL/ Streamline refinance program. However VA has a “VA cash out refinance program” available that enables qualified veterans to receive as much as 90% of the value of your home.
Remember, the VA Cash Out Refinance is a bit more strict regarding credit, income and appraisal, plus the funding fee is a bit higher – 3% than on a VA Strealine Refinance Loan
VA Cash Out Refinance – Items to Consider
Borrowers credit will be qualified
Borrowers income will be qualified
Property MUST be apraised
Maximum LTV is 90%
3% funding fee – can roll into the new loan
No late payments in the last 12 months
You must occupy the property
VA Cash Out Example
Here’a a real example of how the numbers break down in a cash out VA refinance:
You need to put your kid through college so you’ll need to take out a cash loan – so you decide to tap into the equity of your home’s value to get the needed cash for the first year. You find out you qualify for a 5.5% interest rate…your original rate was 6.5% so it may be a good time to do a cash out refinance. Goal: get 25k for college and lower monthly mortgage payment
…Here’s a summary of your mortgage…
You took out a loan 10 years ago at 6.5% for $150,000 on a 30 year fixed rate.
Your monthly PI ( principal and interest) is $948.
After 10 years ( 120 payments ) you OWE $127,103 on the loan, however the home now appraises for $165,000.
VA says you may borrow up to 90% of the appraised value or $148,500: $165,000 x.9= $148,500
So, the new loan will be $152,950 which is calculated as $148,500 + funding fee of 3%… the funding fee is rolled into the new loan.
The $127,103 is paid off and you pocket the difference which is $25,847 which is calculated … $152,950 -$127,103= $25,847.
But what is the new payment? Your new interest rate is 5.5% on the $152,950 which gives you a payment of $868 a month.
So you accomplished your goal, you got the 25k for college and you saved $48 per month on your house payment!