Using a VA Refinance Loan for Renovating or Improving your Home
Maybe something in your house is wearing down or is already broken and needs to be replaced. Maybe you want to redo your kitchen or bathroom and need some extra money to make it happen.
Home renovation and improvement is can come in many different forms, but it all comes down to one big thing: how much money do you have to spend?
In 2015 alone, about $340 billion was spent on home renovations and improvements. That’s a huge amount, and even broken up among individual homes, the amount is still significant.
While spending money on renovations or home improvement might seem expensive, these repairs or improvements can actually increase the value of your home when it comes time to sell. Plus, you’ll be able to enjoy the benefits of the fix or upgrade in the meantime.
With that much being spent, homeowners need to find a way to get money. For current homeowners who are VA eligible, the answer could be a VA cash-out refinance.
What is a VA Cash-Out Refinance Loan?
Put simply, a VA cash-out refi is a refinance loan that allows you to take cash out of your house. It is only available to VA eligible homeowners, regardless of if they purchased their home with a VA loan or not.
The VA cash-out refi works like any other refinance loan, except the benefits are generally better. First off, you can refinance up to 100% of your home’s value – although many homeowners would refinance for much less.
Second, you get to take the refinanced amount out in cash. This is ideal for spending money on big projects, such as renovations and home improvement.
The money you get out can vary, and largely depends on the current value of your home and lender you end up using.
For current homeowners that didn’t purchase their home with a VA loan, the VA cash-out is still an option. The refinance allows for you to pay off a non-VA loan and pull money out. This means paying off your current mortgage, getting money to spend on renovations and likely lowering your monthly payments.
Of course, to get any type of VA refinance, you need to be eligible.
VA Cash-Out Refinance Requirements
The requirements to be eligible for a VA refinance aren’t different from any other type of VA loan. To start, those eligible are:
- Veterans with an Honorable Discharge (including National Guard and Reserve who served in active duty)
- Active duty service members
- Unmarried surviving spouses
- Current National Guard and Reserve members
After that, you’ll want to make sure that you have a decent credit score and enough money to afford to pay the monthly payments after the refinance goes through.
Pros and Cons
Before jumping into a VA cash-out refi, it’s worth considering some of the pros and cons. This should give you a better idea of whether or not you should get a cash-out refi – or if you’re even ready to fund a renovation.
On the plus side, VA cash-out refinances are quick to close, and you can get tons of money out. Also, VA rates are low, and you could end up with a lower mortgage rate when you refinance. This is more likely if you’re switching from another type of loan, such as FHA or conventional.
However, if you’re more interested in saving money instead of getting cash back, other VA refinance loans will offer lower rates.
If you aren’t trying to get your renovation or remodel done ASAP, then you can store the money you save with a different type of VA refinance. It will take longer for you to have the money for the renovation, but you’ll save more money in the long run.
The Bottom Line
If you’re looking for some extra cash for a renovation, there really aren’t many options better than a VA cash-out refinance. VA mortgages are already the best around, and these loans have much lower interest rates than other types of cash loans.
Anyone who is ready for a renovation and is VA eligible should speak with a lender to determine whether a VA cash-out refinance is right for them.