Cash Out Refinance

VA cash-out refinancing allows veterans, active-duty service members, and qualifying spouses to refinance their mortgages while tapping into home equity.

Not only can you take cash out from the equity in your home, you can also lock down a better interest rate.

A cash out refinance replaces your current mortgage with a new one, and you can receive the difference between the new loan amount and the remaining balance of your old mortgage as cash.

This cash can be used for any purpose, such as paying off debt, funding home improvements, or covering other expenses.

Am I Eligible For a VA Cash Out Refinance?

Only those who have a Certificate of Eligibility and who meet VA and lender standards – such as credit and income – are eligible. You must also live or plan to live in the home that you’re refinancing.

Is a Cash Out Refinance the Same as a Home Equity Loan?

No. A home equity loan is a second loan on your property. With a cash out refinance, you still only have one loan to pay back. The new loan completely replaces your existing one.

On top of only having one loan, a homeowner doesn't even need to take money out on his or her own home. Homeowners can use the cash out refinance simply to get a lower rate.

Another goal of the cash out refinance may be to get into a VA loan and remove the Private Mortgage Insurance payment that conventional loans require. VA loans don’t require PMI since they’re backed by the government.

Cash out refinancing is typically a longer process than streamline refinancing, which does not require a credit check, bank authorization or income verification.

However, with a VA streamline refinance, you cannot take out based on equity. Streamline refinancing is designed for veterans and active duty service members who simply want a better rate and monthly payment on their VA home loans.

What are the Drawbacks of a Cash Out Refinance?

Although a cash out refinance can offer several benefits, it’s important to understand the potential pitfalls.

Most importantly, since your home is used as collateral, failing to make payments could result in foreclosure.

Refinancing may also extend the length of your mortgage, potentially increasing the total amount of interest paid over time.

Also, be aware that there are usually closing costs and fees associated with a cash out refinance, and these can total into the thousands of dollars. Upfront costs may reduce the financial benefits, although they can be rolled into the loan. A lender can help you calculate the risks vs. benefits depending on your personal circumstances.

Do I Have to Use the Same Lender?

If you would prefer not to use your purchase lender again, you don't have to if you refinance. It’s always best to shop multiple lenders and compare rates and service.

Red flags to look out for when researching lenders include any promises of absurdly low interest rates, or any claims that you’ll be able to skip payments. If anything sounds too good to be true, it probably is.

How Much Home Can You Afford?

What kind of home can you afford through your VA home loan benefit? Use our calculator to estimate your payments for different scenarios and find providers that offer VA loans and/or conventional mortgages and work with active military and veterans.

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