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VA Cashout Refinance

Consolidate debt, finance home improvements, or lower your monthly payments with a VA Cashout Refinance


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The VA Cashout Refinance

A VA cashout refinance has more flexibility

The term “Loan to Value” or LTV is frequently used in the mortgage industry to determine the percentage of the financed amount in relation to the current market value of a property. In comparison to other popular mortgage programs, the VA program enables veteran borrowers to secure financing at a 100% LTV. This increased LTV allowance provides more flexibility for cash-out options, ultimately enabling a smoother path towards achieving financial goals with the most favorable terms available.

Maximum Loan to Value

Maximum Loan to Value 100%
Maximum Loan to Value 85%
Maximum Loan to Value 80%


The benefits don't stop with the LTV. There are many reasons a VA cashout is the clear choice for your next refinance.

No Private Mortgage Insurance (PMI)

VA loans are a unique type of mortgage loan that offers some significant benefits over other conventional mortgage loans. For instance, VA loans come without the burden of expensive private mortgage insurance premiums that are typically required for most mortgage loans if the down payment or equity in the property is less than 20%. This means that VA loans are a more affordable and accessible option for eligible veterans, active-duty service members, and their families looking to purchase or refinance a home. As a result, VA loans are an ideal choice for those looking for a flexible, budget-friendly, and secure way to finance their home purchase or refinance.

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Lower Interest Rates

It is important to know that VA mortgage rates often have lower interest rates compared to conventional mortgages, even when the borrower qualifications are similar. This is because VA loans are guaranteed by the Department of Veterans Affairs, which lowers the risk for lenders and ultimately results in more favorable rates for borrowers. By choosing a VA mortgage, you could potentially save a significant amount of money over the life of your loan in comparison to a conventional mortgage.

Relaxed Qualifications

As a former service member, you may have wondered whether buying a home is even possible given the stringent qualifying standards of most mortgage programs. Luckily, the Veterans Affairs (VA) program is an exception. The VA loan program offers more flexibility when it comes to assessing applicants’ income, creditworthiness, and assets. This means that you potentially have more options for obtaining a home loan than you might expect. Whether you’re currently on active duty or a qualifying spouse, you may be eligible for a VA loan that could make the home buying process much easier. With the VA program, you can potentially achieve your dream of home ownership without the roadblocks of traditional mortgages.

VA Jumbo Loans

Jumbo loans are a type of mortgage loan that can provide borrowers with more purchasing power, allowing them to buy homes that may be expensive for ordinary mortgage loans. They are known for their high balance, which means they exceed the limits set by Fannie Mae or Freddie Mac on a county basis. This type of loan is typically used for luxury properties and high-priced homes. For veterans, jumbo loans can offer even more benefits, as the VA doesn’t impose any maximum loan limitations. This means that qualified veteran borrowers can borrow higher loan amounts without a required down payment. With a VA jumbo loan, borrowers can obtain the financing they need to purchase their dream homes, without limitations.

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Common uses for cashout proceeds

The VA permits a variety of uses for cashout refinance proceeds.

Debt Consolidation

Consolidation mortgages, credit cards, or other consumer debt in to a lower more convenient payment.

Home Improvements

Finance home improvement projects with a wide range of flexibility.

Higher Education

Invest in yourself of your children's future by finance higher education expenses.


Invest in real estate, stocks, or other investment vehicles with a higher rate of return.

Convert from a Non VA loan

Refinance from another mortgage program to the VA with better terms.


Flexibility to choose what you'd like to use for the cash proceeds.

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Seasoning Period

Loan seasoning applies to all cash-out refinancing VA loans. A loan is considered seasoned if both of the following conditions are met as of the date of loan closing:

  • The first monthly payment of the loan being refinanced was made 210 days or more prior to the first payment due date of the refinancing loan.
  • 6 monthly payments have been made on the loan being refinanced.

Exception to the seasoning requirements.

  • Loan Refinancing Non-Mortgage Debt which are more line tax liens and judgments.
  • Refinancing a mortgage without scheduled monthly payments.
  • Paying off some interim Construction Loans. In cases, that a VA loan is structured as a purchase to payoff an interim construction loan the season period is no applicable. Nor are short term construction loans that don’t provide 6 monthly payments.

Paying off a Lien

A cash-out refinancing loan is a VA-guaranteed loan that can assist homeowners in refinancing any lien or liens against their secured property. This can include mortgage liens such as VA, FHA, or conventional, or even liens related to tax or judgment against the property.

However, it’s important to note that a property without a lien is ineligible for this type of financing. This is not a requirement we’re particularly fond of at our bank because most mortgage programs don’t have this type of restriction.

Lien Position

It is important to note that the VA mandates that all VA loans must be held in 1st lien position.

Net Tangible Benefit

Every VA cash out refinance must pay one of the following net tangible benefits test listed below and also include a loan comparison and home equity disclosure to the veterans.

  • The new loan eliminates monthly mortgage insurance PMI.
  • The loan term of the new loan is less than the loan term of the loan being refinanced.
  • The interest rate of the new loan is less than the interest rate of the loan being refinanced. (Note: If the loan being refinanced had an adjustable interest rate or was modified, the current interest rate must be used when determining if this requirement has been met.)
  • The monthly (principal and interest) payment of the new loan is less than the monthly (principal and interest) payment of the loan being refinanced.
  • The Veteran’s monthly residual income is higher because of the new loan. (residual income, including refinancing monthly PITI (principal, interest, taxes, and insurance) payment vs. current residual income, including monthly PITI payment of the loan being refinanced.) In cases where TI amounts are changing between the application date and the closing date of the refinance transaction, the new TI amount will be used in determining residual income for both the current and refinanced loan).
  • The new loan is used to pay off the Veteran’s interim construction loan.
  • The new loan to value is equal to or less than 90 percent of the reasonable value of the home, i.e. LTV ≤ 90%.
  • Refinance of an adjustable-rate mortgage to a fixed-rate mortgage.

Fee Recoupment

Fee recoupment applies to refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the existing VA loan being refinanced . The lender must certify that the recoupment period of fees, expenses, and closing costs (included in the loan and paid outside of closing), divided by the principle and interest monthly savings do not exceed 36 months from the date of the loan closing.

  • For example if the total principle and interest savings are $100 per month the total closing costs can not exceed $3,600 = 36 months.


The veteran must certify that he or she intends to personally occupy the property as his or her residence.

Appraisal and Inspections

In order to determine the current market value of the home, a VA appraisal is necessary. Additionally, the property must meet the minimum property requirements as set out by the VA. Depending on the location of the subject property, further inspections may be required for wood destroying insects, well water, or septic.

Income and Credit Underwriting

In order to secure a VA loan, it is important for the veteran borrower to meet the required income and credit qualification standards set by both the VA and the lender. These standards are similar to those that must be met when purchasing a home, and they ensure that the borrower can afford to repay the loan and is creditworthy.

Texas Cashout Refinances

Texas state regulations place specific restrictions on mortgage refinancing, with cash-out refinances limited to an 80% loan-to-value. Such mortgages are referred to as Texas A6. As Texas views the VA program as a federal guarantee, it enforces strict regulations prohibiting VA cash-out refinances that involve cashback or paying off further debt, aside from the first mortgage lien at closing.

Ultimately, Veterans in Texas may only refinance a non-VA mortgage to a VA mortgage or a VA to VA streamline without any cash back at closing.

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