VA Cash-Out Loan Advantages
There are numerous advantages to a VA cash-out refinance. Here are the top 6 reasons:
Since VA loans are backed by the government, lenders can often offer lower rates than they would be able to for a traditional loan. Eligible service members will generally pay a better interest rate with a VA loan than they would have with a conventional mortgage. You’ll continue to enjoy excellent interest rates with your cash-out refinance loan, as well.
Rates for VA loans are not set by the Department of Veterans Affairs, despite popular belief. VA-approved lenders and brokers set their own rates, often on a daily basis. VA loan rates change with the financial market just as rates for conventional mortgages do.
With the cash-out refinance, you can borrow up to 100% of your home’s appraised value. Because of this, all homes must have a full appraisal done. However, the borrower does not ever have to borrow the whole amount of the home’s value.
If you refinance with a cash-out refinance, you can save yourself a lot of money on interest by paying off other debt. Interest on your credit card debt, for instance, is probably much higher than the interest on your refinanced loan will be. You can pay off credit card debt, as well as student loans or auto loans, as part of your cash-out refinance.
Debt is often a very harsh cycle. People who have trouble making debt payments often see a drop in their credit scores. People who have lower credit scores have to pay a higher interest rate, making it even harder to pay down debt. By tapping into your home’s equity, you may be able to break this cycle and put yourself in a better financial situation. By consolidating your debt, you have a better shot at managing your overall debt load. You may even be able to lower your total monthly debt payments.
The cash-out refinance allows you to get cash back from the equity you have in your home and then use it at your discretion. This lump sum can be used however you see fit, including to pay for school or home improvements or repairs. The cash you receive can be used for any purpose that is acceptable to the lender.
You can apply for a cash-out refinance at any time that it makes financial sense for you to do so. This is true whether you have a traditional VA loan or a VA adjustable-rate or hybrid loan.
One of the key factors in securing a good deal on a home purchase is having a high credit score. In fact, you often need a good credit score to get a mortgage at all. But it’s different with VA loans and refinances—you can usually get a good loan even with a low credit score.
The VA does not require a minimum credit score, although lenders usually have some requirements to minimize their risk. But because this is a benefits program, guidelines are often more flexible than they would be for conventional loans.
You can even apply for a VA refinance just two years after a bankruptcy has been discharged. A full explanation of the bankruptcy will be required. Job stability is a must in this situation. It is also possible to apply for a VA refinance just two years after a foreclosure.
Find the best VA loan for your situation