VA Cash-Out Refinancing Loan Basics

There are a variety of options VA borrowers have when it’s time to consider refinancing a home loan. One of those options is the VA cash-out refinancing loan. Those who have examined this option in the past may not be aware of changes to the cash-out refinancing loan program; VA rules once limited these loans to 90%, but since the Veterans’ Benefits Improvement Act of 2008, cash-out refinancing can now be made for up to 100% of the value for qualified borrowers.

For those unfamiliar with the VA cash-out refinancing program, this type of VA insured loan refinances “any type of lien or liens against the secured property.” At the time of this writing, VA rules allow the liens to be current or delinquent, and from “any source” including “tax or judgment liens, or VA, FHA, or conventional mortgages.”

Cash-out loans insured by the VA allow the borrower to take cash proceeds from the loan above and beyond the amount needed to pay off the liens “for any purpose acceptable to the lender.”

VA rules for cash-out refinancing loans state, “The loan must be secured by a first lien on the property.” The VA allows cash out from the loan to pay for allowed fees, charges, discount points, etc.

Unlike a VA Interest Rate Reduction Refinancing Loan, the VA requires the borrower to have “sufficient available entitlement for the loan.” VA requirements also add, “If an existing VA loan on the same property will be paid off by the refinancing loan, the entitlement used for that existing loan can be restored for purposes of obtaining the new loan.”

Occupancy requirements for a cash-out loan are the same as a typical VA home loan–the borrower must certify the home being refinanced is the primary residence. This is not the case for VA Interest Rate Reduction Refinancing Loans, where the borrower must certify only that the home was the primary residence in the past.

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