College expenses. A major home improvement project. Paying off debt. There are many personal reasons why Veterans who already own a home may consider using their existing home value to “cash out” on their equity. To cash out means that you can get extra cash by tapping into the existing equity in your home. Depending on how much equity you have, this amount could be several thousand dollars.
The VA Maximum Cash Out Calculator will let you know how much cash is available to you from your home equity for a VA cash-out refinance loan.
A home can be one of your biggest financial assets, in terms of providing additional funds when you need them. A “cash-out” refinance loan provides an opportunity to tap into your home equity and take out the amount that is available to you.
“Home equity” is the amount of your property that is truly your asset to use. Even though you may technically own your home, if you are still paying off a mortgage loan, then only the portion that you have already paid off is the amount of equity that is considered “yours” to access for cash.
To find out the maximum equity to cash-out, use the VA Maximum Cash Out Calculator. The calculation considers your state and city, then takes the overall current value of the property and deducts the amount that is outstanding on any loans, such as your mortgage loan. For example, if your house is currently valued at $200,000 and you have $160,000 remaining on your mortgage loan, then $40,000 is available to you for “cash out.”
Veterans can take out a “VA Cash-Out Refinance Loan” if they have a VA-guaranteed mortgage. The loan also can be used to refinance a non-VA loan into a VA Loan. Either way, Veteran Affairs will guarantee loans up to 100% of the value of your home depending on county loan limits.
Getting a cash-out refinance loan is best described as taking out a bigger mortgage to replace your current one. For example, if your home is worth $300,000 and you still owe $200,000, then your maximum home equity is $100,000. If you need $25,000 to pay for the cost of your child attending college, you can tap into this equity as cash – for any amount up to the $100,000 maximum.
If you choose to cash out only $25,000, you may take out a refinance loan for $225,000 ($200,000 to pay off your current loan and $25,000 in cash). If you choose to take out the maximum cash-out amount of $100,000, your refinance loan would be for $300,000 total.
The VA cash-out refinance loan has many benefits. Not only are you able to access cash to meet significant financial needs and goals in life, such as a college expense, kitchen remodeling project or family emergency, but Veteran Affairs guarantees the loan.
In addition, with a refinance loan, you may be able to lower your interest rate or get a lower monthly mortgage payment. Veterans have the security of knowing that if they are facing a significant financial challenge or goal, they can use the cash-out refinance option to get cash when they need it.
According to the Veteran Affairs guidelines, the maximum loan amount for the cash-out refinance loan can be no higher than 100% of your property’s value. To qualify for this type of loan, the following are needed:
Regarding the credit score, Veteran Affairs does not set a minimum score to qualify. However, many lenders may require a minimum credit score of 620 to refinance. During the application process, you can maintain privacy and do not need to provide the reason for wanting or needing the loan.
A VA Loan also is eligible for a “streamline” refinance in lieu of a cash-out. The VA streamline refinance loan uses a simplified or “streamlined” approval process. (In the industry, you may hear the streamline refinance loan referred to as an IRRRL, or Interest Rate Reduction Refinance Loan.) With the streamline refinance, the process is streamlined with:
However, in the streamlined process, you cannot cash out or get additional cash from the refinance. If you need additional funds, then the streamline refinance would not provide that benefit like the VA Cash-Out Refinance Loan.
Even though the VA Maximum Cash-Out Calculator will determine the maximum amount of cash available to you in your existing home equity, keep in mind that you do not need to “max out” on the limit. If you have available $40,000 of equity to cash out, but only need $25,000, you can choose to take that lesser amount.
To find out how much cash is available to you now, begin by using the VA Maximum Cash-Out Calculator. Simply enter your state, city, current value of your property and the amount that you still owe on your existing mortgage loan. The final calculation will show how much cash is available in your home equity. You can then decide how much to take in a refinance loan, depending on your financial needs.
After using the calculator, consult one of our licensed refinance specialists to understand all the options available to you for meeting your financial needs and discuss whether or not a VA Cash-Out Refinance Loan is right for you.
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