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VA refinancing loans are offered as “streamline” refinance loans for those who already have a VA mortgage, and also as cash-out refinancing mortgages which can be used by qualified borrowers to refinance a VA or non-VA loan.

Cash-out refinancing means that any money left over after the first loan has been paid off in full with the proceeds of the new loan can go back to the borrower. New purchase VA loans and Interest Rate Reduction Refinancing Loans don’t allow money back to the borrower with the exception of any legitimate refund owed at closing time. Such refunds might be for money paid up front for a fee or expense later rolled into the VA loan amount.

The VA loan rules for cash-out refinancing mortgages are clearly spelled out in the VA Lender’s Handbook. According to that rule book, the definition of a VA cash-out refinance is, “a VA-guaranteed loan that refinances any type of lien or liens against the secured property.”

What kind of liens does the VA allow to be paid off under this program?

  •   current or delinquent liens,

  • liens from any source, such as

  • tax or judgment liens, or

  • VA, FHA, or conventional mortgages.

As stated earlier, the proceeds from a VA cash-out refinance loan “beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower for any purpose acceptable to the lender” according to the VA loan rulebook. In all cases, the VA cash out refinance loan must be “secured by a first lien on the property.”

VA cash-out refi loans can be for up to 100% of the appraised value of the home, and borrowers should expect to pay for a new appraisal as part of the loan process.

The maximum VA guaranty for these refinance loans is the same as those for new purchase home loans. However, anyone who may have applied for cash-out refinancing several years ago should know what the VA has to say on this subject; “Prior to October 10, 2008, the maximum guaranty had been limited to $36,000.  However, guaranty on this type of loan is now computed the same as for purchases (i.e., can vary depending on location).”

Talk to a loan officer for more information on VA cash-out refinance loans and how you can start the application process.