If you want to take out some of the equity you’ve built up in your home, you can refinance your VA Loan and cash out up to 90 percent of your home’s value. You can use this money for home improvements, to pay off debts or other expenses.
Borrowers often ask about getting a 2nd mortgage to cash out equity in their homes or using a HELOC (home equity line of credit). While these options can be simple solutions, there are a few downsides. These options typically have higher interest rates than the long term interest rate you can receive with a 25 or 30 Year Loan. Also, 2nd mortgages are often subject to short term interest rate fluctuations.
It should also be noted that should long term interest rates drop significantly, it is more difficult to refinance utilizing the VA Streamline since the 2nd mortgage will have to be re-subordinated. This can delay your refinance and lenders may charge extra up-front fees to prepare the subordination documents. We’ve seen some 2nd mortgage lenders deny the subordination agreement because they do not want to see the loan amount increase, which resulted in borrowers missing out on significant monthly savings by not being able to refinance at a lower interest rate.
It's important to talk to a professional at Freedomstar Financial to analyze your unique situation and choose the program that is right for you.
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