Qualified homeowners in need of extra cash for large purchases or emergencies may be able to access their home equity with a VA cash-out refinance. Veterans and service men and women with sufficient equity in their home may qualify for this VA refinance program, allowing them to lower both interest rates and monthly mortgage payments. Before you apply, it’s important to know how the cash-out mortgage program works.
What Is a Cash-Out Refinance?
The VA cash-out refinance program is for military veterans or current service members who are currently paying off a home loan. Whether you purchased your home using a VA-guaranteed or conventional loan, you can apply for a VA refinance in order to lower your current interest rate. For those who would like to make repairs to their homes, pay off high-interest credit cards or other debt, or simply have cash on hand for emergency spending, a cash out mortgage refinance can help..
How Do I Apply for a VA Refinance?
In order to apply for the VA cash-out refinance (also known as a «cash out mortgage,») you'll need to submit an application with a VA lender and have your home appraised. Your lender requires this appraisal in order to determine how much cash you're eligible to receive.
Under this VA refinance program, you can receive up to 90 percent of your home's appraised value -- as long as your home has the sufficient equity and can withstand the loan-to-value ratio. In order to qualify for a cash out mortgage, you must also meet credit and income guidelines.
What Can I Do with My Cash?
Once you're approved for the VA cash-out refinance, you're free to spend the money as you wish. However, take into consideration that you're accruing interest on this money. It’s a good idea to use these funds only for things that you ordinarily wouldn’t be able to save up for, such as emergencies or major home repairs.
Some homeowners use their cash from the VA refinance to consolidate high-interest credit cards and other debts. Just be sure you don’t go back to charging on all those cards, or you can easily end up doubling what you owe.