Do you have an abundance of credit card debt? Does your home need repairs? Is your home dated and in need of some upgrades? Are you in need of a large sum of cash for another reason?
Life happens, and sometimes we incur major expenses. For most Americans one of their greatest sources of wealth is the equity in their home. Equity is simply the difference between what your home is worth, and how much you owe on your mortgage.
For example, if your house is worth $250,000 and you currently owe $100,000 then you have $150,000 in equity. You can use your VA loan benefits to borrow against the equity in your home. Lenders will limit what percentage of your home’s value you can borrow against, and this may vary from lender to lender. But the cash-out VA refinance is a great tool to help you borrow the money you need, at a low rate of tax deductible interest. (If you live in Texas you need to see this)
The process is pretty simple.
You’ll start an application with your lender, and get them all the necessary documents. You’ll decide on a preliminary loan amount, and order an appraisal. As long as your home appraises for the desired amount you won’t have to adjust your loan amount.
If the appraisal comes in low, you may need to lower the amount you’re borrowing. If the appraisal comes in high, you may be able to increase the amount you’re looking to borrow. The benefit of the VA cash-out refinance over other programs is the fact that it enables you to borrow a larger percentage of your homes value at a lower interest rate than other loan programs.
Cash-out refinances are especially awesome if they lower your interest rate. You may be able to borrow against the equity in your home, and while not significantly increasing your monthly payment.
For example if you borrowed $200,000 at 4.5% interest over 30 years, your monthly payment would be $1,013.
But what would it look like if you decided to refinance that loan and take out $50,000 in cash. However, the rate on the new loan was going to be lower than your current rate?
If you borrowed $250,000 at 3% interest over 30 years, your monthly payment would be $1,054.
That’s an increase in your monthly payment of $41. I challenge you to find another way to borrow $50,000 and have a payment of $41. Even better if you’re using the money to pay off other debts with large monthly payments, this may result in huge cash flow savings every month. I’ve used cash-out refinances to help families save over $1,000 a month in payments for various debts.
If this sounds like something that would be helpful for you, let’s chat.