How to Get Out of Your Mortgage with a VA Cash Out Refinance

 Get out of a mortgage with a va cash out refinance

If you’re a veteran or surviving spouse who wants to get out of a mortgage with a high interest rate, as well as tap into some of the equity in your home, a VA cash-out refinance could be the perfect solution.

A VA cash-out refinance has pretty much all the benefits of a traditional VA loan, plus the ability to get a decent chunk of change in your bank account.

Benefits of the VA Cash Out Refinance

Much like regular VA loans, VA cash-out refinancing has major benefits, including:

  • Lower than average interest rates (much of the time, at least).

  • No private mortgage insurance (PMI).

  • VA limits on the amount of closing costs that can be paid.

  • No prepayment fees allowed.

  • Ability to get assistance from the VA if you have trouble repaying your loan.

Who is a VA Cash Out Refinance Right For?

How do you know if you should go forward with a VA cash-out refinance? First off, you must be eligible for VA loan benefits. To qualify, you must fit any one of these criteria:

  • Active duty military personnel after 6 months of service.

  • Reservists and members of the National Guard with 6 years of service, or 181 days of active service (if called upon).

  • Surviving spouses of servicemembers who died in combat or as a result of combat-related disabilities.

  • Military veterans who discharged in any circumstances other than dishonorable.

Some of the most popular reasons that borrowers get VA cash-out refinancing can include paying for college tuition (for themselves or their children), doing renovations or significant home improvements, paying medical bills, or getting cash to start a new business.

How Much Cash Can You Get From a VA Cash-Out Refinance?

As of 2018, you can get up to $721,050 from a VA cash-out refinance. Of course, you’ll need to have all that equity in your home to start out with if you want to take that much out. 

Most VA cash-out refinance borrowers take out significantly less, considering the median U.S. home is currently valued at $216,500, which is less than a third of the maximum VA cash-out refinance amount. 

VA Cash Out Refinance vs. VA Streamline Refinance

When looking at all the VA refinancing options available to you, you might want to compare VA cash-out refinancing to one of its VA siblings, the VA Streamline Refinance.

VA Streamline Refinancing has its own benefits, like being able to use it on a home that isn’t your primary residence. When compared to cash out refinancing, Streamline Refinancing also has a lower average VA funding fee (0.5% of the loan). Cash-out refinancing, on the other hand, has typical funding fees of between 2.15 - 3.3%. Keep in mind, though, that VA funding fees are sometimes waived, especially for disabled veterans.

Finally, VA Streamline Refinances are slightly more lenient than cash-out refinances, especially when it comes to late mortgage payments in the 12 months before application. While a VA Streamline Refinance allows for one payment that’s 30 days late, VA cash-out refinancing does not allow for any.

To Get a VA Cash Out Refinance, You’ll Need a Certificate of Eligibility (COE)

You’ll need to get a Certificate of Eligibility, or COE, in order to get any kind of VA loan. You don’t necessarily need a COE to start the preapproval process, but you’ll always need one for final approval.

The exact steps you’ll need to take to get a COE differ based on whether you’re active duty, a surviving spouse, national guard, or reserve. To determine the right steps for you, check out the VA’s comprehensive COE guide.

You Don’t Need to Have a VA Loan to Get a VA Cash Out Refinance

Another important note is that your original mortgage doesn’t have to be a VA loan in order to get a VA cash-out refinance. That’s right: if you have a conventional loan, FHA loan, USDA loan, or Jumbo Loan you can still do a VA cash-out refinance -- as long as you’re VA eligible.

But, no matter what kind of loan you’re thinking of refinancing from, make sure you’re actually getting a better rate on your VA cash-out refinance. To do this, compare your VA refinance rate with the APR (annual percentage rate) of your current loan, and remember that you will have to pay a certain amount of closing costs on your new loan.

A VA cash-out refinance is a fantastic way to save money now and in the long-run. To get started working with a VA approved lender, contact home.loans for a free consultation. We’ll be happy to get you started in the right direction.