Use Your VA Benefit for a Cash Out Refinance With a Purpose

VA's full refinance program. It replaces your existing first mortgage with a new VA backed loan, with full underwriting and a VA appraisal. Despite the name, it serves two purposes: restructuring the mortgage itself, including moving a non VA loan into VA financing, and converting part of your home equity into cash. It requires a Certificate of Eligibility, occupancy of the home, and a demonstrated benefit to you.

No, and this surprises many Veterans. An eligible borrower can refinance an FHA loan, a Conventional loan, or another qualifying first mortgage into VA financing through this program. That is one of the defining differences from the VA IRRRL, which only refinances existing VA loans. VA eligibility, entitlement, occupancy, and underwriting requirements still apply.

They are different tools. The IRRRL is a streamlined refinance for existing VA loans only, generally without an appraisal or a full credit package, with a lower funding fee, and it cannot provide cash out. Its job is a lower rate or payment. The cash out program is fully underwritten with a VA appraisal and a higher funding fee unless you are exempt. Its job is equity access, refinancing non VA loans into VA financing, and restructuring an IRRRL cannot do. If you have a VA loan and only want a better rate, ask about the IRRRL first, and we will tell you if it wins.

VA's internal labels. A Type I transaction means the new loan, including any financed funding fee, does not exceed the payoff of the loan being refinanced: you are replacing the mortgage, not extracting equity. A Type II transaction means the new loan exceeds the payoff: you are accessing equity. The labels mostly determine which extra rules apply when your existing loan is already VA backed, including seasoning and, on certain transactions, cost recovery and rate reduction requirements. You do not need to memorize any of that. You need one plain answer: am I improving my mortgage, or accessing my equity?

It depends on the complete transaction. VA rules cap the new loan, including any financed funding fee, at the home's reasonable value as determined by a VA appraisal, and your entitlement, income, credit, residual income, and lender requirements determine what your loan actually supports. Lender maximums are often set below VA's ceiling. Just as important: a maximum is not a recommendation. Borrowing to any ceiling leaves no cushion, and the better question is how much you actually need and what equity you want left the day after closing.

A one time fee VA charges to sustain the loan program, generally [CMS: current VA cash out funding fee, first use] of the loan amount for first use of the benefit and [CMS: current VA cash out funding fee, subsequent use] for subsequent use. It can be paid at closing or financed into the loan, though a financed fee accrues interest. Certain borrowers are exempt, including Veterans receiving VA compensation for a service connected disability, certain surviving spouses, and other categories VA defines. VA backed loans carry no monthly mortgage insurance. Current figures are published by VA and linked in our sources section.

It means the refinance must genuinely improve your position rather than just generating a transaction. Every VA Cash Out Refinance must satisfy at least one recognized benefit, such as a lower rate, a lower payment, a shorter term, eliminating monthly mortgage insurance, moving an adjustable rate to a fixed rate, or increasing your monthly residual income. Your lender must also provide the written old loan versus new loan comparison twice, including the dollar amount of equity being removed. It exists to protect you, and it is the same standard our phone review is built around.

No, and be cautious of any advertising that promises skipped payments. Continue making your current mortgage payments until you receive confirmed instructions from your servicer. Interest is always accruing somewhere, and a payment that looks skipped is generally built into the new loan.

Two separate benefits may apply. First, a Veteran who receives VA compensation for a service connected disability, or who otherwise qualifies for an exemption under VA rules, may not have to pay the VA funding fee. On a cash out refinance the funding fee is the largest program specific cost, so an exemption can change the entire comparison. Second, Georgia provides a disabled Veteran homestead property tax exemption for qualifying residents, including Veterans rated 100 percent totally disabled, Veterans paid at the 100 percent rate because of unemployability, and certain Veterans who meet other applicable qualification criteria. The home generally must be owned and occupied as the Veteran's primary residence, and the exemption must be applied for through the appropriate county office. If it is approved and property taxes are included in the mortgage escrow account, the servicer may adjust the escrow portion of the monthly payment after receiving and processing the updated tax information. Eligibility requirements and exemption amounts may change, so confirm current details with your county tax office or the Georgia Department of Veterans Service.