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Excerpt for the VA Handbook

The maximum loan amount for a VA cash-out refinance loan is 100% of the appraised value.

A VA cash-out refinance loan is a VA-guaranteed loan that refinances any type of lien or liens against the secured property. The liens to be paid off may be:

  • Tax or judgment liens, or
  • VA, FHA, or conventional mortgages.
  • Credit cards, auto loans, second mortgages

Loan proceeds 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.

The loan must be secured by a first lien on the property.

The veteran must certify that he or she intends to personally occupy the property as his or her home.

Quick Reference Table for Streamline Refinances (IRRRLs) Versus Cash-Out Refinancing Loans

FeatureStreamline RefinancingCash-out Refinancing
Cash-out RefinancingTo refinance an existing VA loan at a lower interest rateTo pay off lien(s) of any type – can also provide cash to borrower
Interest RateRate must be lower than on existing VA loan (unless existing loan is an ARM)Any negotiated rate
Monthly Payment AmountPayment must be lower than that on an existing VA loan (unless the ARM is being refinanced, a term is shortened, or energy efficiency improvements are being included)No requirement
Discount PointsReasonable points can be paid – only two of these points can be included in the loan amountReasonable points can be paid – if paid from loan proceeds
Maximum LoanExisting VA loan balance, plus allowable fees and charges, plus up to two discount points, plus the cost of any energy efficiency improvements, plus the VA funding fee100 percent of the reasonable value of the property indicated on the NOV, plus the cost of any energy efficiency improvements, plus the VA funding fee
EntitlementVeteran re-uses the entitlement used on the existing VA loan – the refinance does not impact the amount of entitlement the veteran has in useMust have sufficient available entitlement – if existing VA loan on the same property is being refinanced, entitlement can be restored for the refinance
Fees and Charges in the LoanAll allowable fees and charges, including up to two discount points, may be included in the loanAllowable fees and charges and points may be paid from the loan proceeds
Cash to BorrowerNot permittedBorrower can receive cash for any purposes acceptable to the lender
Lien/Owner-shipMust be secured by first lien – veteran must own propertyMust be secured by first lien – veteran must own property
Refinance of Other LiensCannot refinance other liens – can only refinance the existing VA loanCan refinance any type of lien(s)
Maximum Loan TermExisting VA loan term plus 10 years, not to exceed 30 years + 32 days30 years + 32 days
OccupancyVeteran or spouse of an active duty servicemember must certify to prior occupancyVeteran or spouse of an active duty servicemember must certify as to intent to occupy
AppraisalNoneAppraisal is required
Credit UnderwritingCredit report will be requiredFull credit information and underwriting are always required