VA Cash Out Refinance
New VA cash out refinance guidelines it’s made a mess of some scenarios. In a nutshell the VA has restricted being able to do a 100% cash out refinance unless you meet certain criteria.
Unfortunately gone are the days when you can just take out equity out of your house to either pay off debts or make an investment in a property or land.
So the VA now says that your VA cash out refinance loan has to meet net tangible benefit. So what does that mean? Basically all VA cash out refinances must pass a net tangible benefit test. The net tangible benefit requirement is met if refinancing the loan satisfies one of the following.
Eliminates monthly mortgage insurance. So if you’re going from an FHA or a conventional loan where you have a monthly mortgage insurance that’ll work if your loan term is less than the new term.
If your interest rate is less on the new loan if your monthly principle and interest is unless on a new loan
If you’re is if it raises a residual income which is if you’re using it to pay off debt and the amount of money that you have leftover every month after paying all your bills is more they’ll allow you to do it. So you can still use a hundred percent cash out refinance to pay off debt. Unfortunately now you’re just not going to be able to remodel your house or do something else with the money. It literally has to go towards paying off debt. This increases your residual income which is the amount of money that you have leftover every month after paying all your bills.
It can be used to pay off a construction loan, however your max is now 90% instead of a 100%.
It also can be used to refinance an adjustable rate mortgage.
In a nutshell if you do not meet any of the net tangible benefit criteria like get rid of mortgage insurance, or lower your payment, or lower your rate then you are only eligible to take out 90% of the appraised value.
This new VA cash out guide line is very unfortunate for a lot of veterans that would like to use the equity of their home to buy investment properties or put more money into improving their homes.
Also they’ve added two additional disclosures that you have to sign. One is a loan comparison disclosure and a home equity disclosure that states that you understand that you are pulling out the equity in your home.
If you have questions on the new VA cash out refinance guidelines call 855-956-4040 to speak with a VA home loan specialist.