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Your Complete Guide to the VA Home Loan

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    Cash-Out Refinance Loans

    Many people think the VA loans program is only available to qualifying military personnel and surviving spouses who are looking to purchase their first homes, but this is not the case. VA loans are also available to qualified borrowers who wish to refinance their homes, either to access cash via their home’s equity or to save on monthly payments by securing lower interest rates. The Fortress VA Loans family of VA loan specialists and lenders helps veterans, active-duty service members, and their families navigate the VA refinancing process every day.

    As a borrower makes payments on a mortgage, the share of their home that they actually own gradually increases, giving them equity. For example, if the purchase price of your home was $200,000, and you made enough payments so you now only owe $160,000 (ignoring interest and dealing only with the principal in this case), you now have $40,000 of equity in their home. If you’re a current or former military member who needs a large amount of cash for one or more expenses, you may be able to refinance your current mortgage with a VA Cash-Out refinance loan, providing you usable funds against your home equity. Qualified borrowers can use the Cash-Out option regardless of whether their original mortgage was obtained through the VA or conventional lending sources.

    If you were the home owner mentioned above, you could receive up to $40,000 for immediate use from a Cash-Out refinance, since that is how much equity you have in their home. For purposes of this example, however, we’ll say you only need a cash amount of $20,000. The Cash-Out refinance would give you a new mortgage (replacing your previous one) of $180,000, which combines the $160,000 still owed on your home and the $20,000 you are receiving in cash. Note that the Cash-Out refinance is not the same thing as taking out a second mortgage (to run concurrently with the original one) or a home equity line of credit. Closing costs and certain other fees can be rolled into the value of the new mortgage as well.

    As with a VA home purchase loan, VA Cash-Out refinance loans are guaranteed by the United States government, giving lenders a greater sense of security and willingness to work with the borrower. The Cash-Out is a popular choice because it gives you a longer period of time to repay the loan and because its interest rates are usually lower than purchase loans. Here are some common uses for the cash you receive from this type of VA refinance:

    • Repair or improve a home
    • Pay off debt
    • Cover medical expenses
    • Pay tuition and other school-related costs

    It’s even possible for someone looking to refinance a non-VA loan to use the Cash-Out option without actually taking out any cash. The Cash-Out refinance can only be used for a borrower’s primary residence, and it is not available to Texas residents due to state regulations.

    If you’re a veteran, an active-duty service member, or a surviving spouse who is looking to refinance your current mortgage, contact Fortress VA Loans today to see if the Cash-Out refinance option fits your needs. Our family of VA loan specialists and lenders can answer all your questions and guide you through the entire loan process from prequalification to closing.