Tuesday, June 19, 2012

Can I Use a VA Loan to Cash Equity

By Luke Arthur

Getting a mortgage that is guaranteed by the United States Department of Veterans Affairs is one of the major benefits that you can get as a result of serving in the military. If you already own a house and you want to take cash out of the equity, some VA loans can be used for this purpose.

The VA will stand behind a mortgage refinance so that you can take cash out of the equity. To make this work, you can borrow up to 90 percent of the value of your home. Anything that you have left after paying off the primary mortgage can be used for any purpose. For example, if you owe 70 percent of the value of your house, you could refinance and get 20 percent of the value of your house in cash.

The VA also offers a program known as a streamline refinance or interest rate reduction loan. With this type of loan, you will not be able to take out any cash from the equity in your home. A streamline refinance is only for the purpose of lowering your interest rate and your payment. These loans do not have any credit checks or income verification. They simply give you a new loan based on the old information you used to get approved in the past.

When deciding whether to use a VA loan, it helps to look at some of the benefits that they come with. For example, with this type of loan, you can get lower closing costs and you do not have to make a down payment. The loan does not require you to pay private mortgage insurance since the VA is standing behind the loan for you. You also can negotiate the interest rate with your lender.

Even if you are eligible to take out the equity from your home through a VA loan, it does not necessarily mean that it is a wise decision financially. Before going through this step, make sure that you are using the money for a viable purpose. For instance, using the equity to take a vacation or to buy a big screen TV may not be the best use of your equity. Using the money to improve the property or to consolidate loans might make more sense.


http://www.lenderva.com

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