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VA’s Cash Out Refinance Gaining Popularity for Numerous Benefits

By agedleadstore
VA’s Cash Out Refinance Gaining Popularity for Numerous Benefits Feature Image

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3 minute read

A refinance option for veterans is becoming more widespread as lenders and borrowers realize its potential.

The VA cash-out refinance allows veterans or active duty service members the ability to tap into all their home equity, whether they currently have a VA loan or other loan type.

The most commonly offered refinance option for veterans is the Interest Rate Reduction Refinance Loan (IRRRL), a streamlined process that is known for its speed and simplicity but no cash-out.

Most lenders previously only offered the VA IRRRL option. While the streamlined process is popular because it doesn’t require an appraisal or income documentation, you must have a current VA loan to take advantage of it.

The VA cash-out is the only refinance option for veterans that allows them to refinance out of any loan type and cash out on their home’s equity.

This means veterans who previously had a conventional or FHA loan can refinance to a VA cash-out loan.

The cash-out option also gives veterans the option to get rid of private mortgage insurance (PMI) if they currently have a conventional or FHA loan.

In recent years, the VA has made updates to their cash-out option to offer more options and strip away loan limits.

There are now two classes of cash-out loans, known as Type 1 and Type 2.

With Type 1, the new loan amount is equal to or less than the existing loan. This type works for those who don’t want cash back at closing.

Type 2 is the cash-out option. The new loan amount is larger than the current loan that’s being refinanced. 

There are no restrictions for how borrowers choose to use their cash-out funds. Common uses include home repairs, education costs, large purchases, or debt consolidation.

Depending on the lender, a VA cash-out refinance allows up to 100 percent financing, so veterans can tap into all available equity in their home. As with other refinances, borrowers also can adjust their rate and terms with this option.

To qualify for a VA cash-out, borrowers must be a veteran, an active member of the military, or a surviving spouse. Proof is required in the form of a Certificate of Eligibility (COE).

Mortgage lenders interested in offering VA cash-out refinance options, or those who already offer this option but want to target new leads, can connect with prospective borrowers through aged leads.

Aged refinance leads are validated leads that allow lenders to find those who are newly qualified, or those who are interested and need more information before making a final decision.

Many borrowers are unaware of the VA cash-out options available to them, since most lenders previously only offered a streamlined refinance option.

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