Are these your priorities for a VA refinance loan?
- I need cash for a major expense
- I want to reduce debt and combine payments
A VA cash-out refinance loan can provide eligible borrowers with cash out of the equity from their homes to pay for major expenses and combine debt. In a cash-out refinance situation, the borrower refinances his or her mortgage with a higher principal balance and acquires the cash generated from the transaction.
Borrowers who have been making their scheduled monthly mortgage payments may have begun to build equity in their homes. With most mortgages, scheduled payments for the first couple of years are applied primarily toward interest. If a house holds its value or increases in value, there may be some equity built up that the borrower can cash in on.
Cash out of equity from a VA refinance is often used to pay off college loans, pay off credit cards, car loans, pay medical bills or make home improvements. Important expenses like these can often be refinanced into the mortgage at a lower interest rate than with short-term financing avenues.
Sometimes a VA cash-out refinance loan can also provide a lower interest rate and monthly payments if the conditions are right.
Borrowing money against a home is a major decision, which should be undertaken carefully with the long term financial picture in mind. Watch for our next article about VA refinance in this series.
More information about refinancing with a VA loan to get cash out of equity can be obtained by speaking with a VA mortgage professional.