Tips & Special Topics
VA Cash-out Refinance Instead of a Military Loan
Added August 17, 2009
Military loans are considered short-term personal loans available only to veterans and active duty military. As an alternative to payday loans and credit cards, a military loan can provide fast cash for some borrowers. Depending on the lender, a military loan can be made for $500 to $10,000. Typically, these short-term loans have interest rates between 10 and 25 percent. And, most military loans must be repaid in twelve months.
But, for veteran homeowners seeking cash for debts, home improvements, student loans and other expenses, there may be a more cost-effective option. A cash-out VA refinance loan can, in many cases, provide more cash than a military loan with much lower interest rates and much longer payment durations. A longer duration could mean more interest dollars are paid over time; but the payment is lower, so more dollars are available for “current” needs each month.
Cash-out VA refinance loans allow homeowners to turn the equity in their homes into cash. Loan durations can be 15 or 30 years and interest rates for cash-out VA refinance loans are in line with national market mortgage interest rates.
Borrowers need not provide a reason other than the desire to refinance a mortgage in order to receive cash out of equity with a VA refinance loan. What’s done with the cash is at the borrower’s discretion. Here are just a few examples of what someone might do with cash obtained with a cash-out VA refinance loan:
• Pay off high interest credit cards
• Buy a car
• Remodel a home
• Pay college tuition
• Start a business
With a cash-out VA refinance loan a borrower can get cash out up to 100% of the equity in his or her home with no private mortgage insurance. Other advantages cash-out VA refinance loans may have over military loans might include:
• Interest paid each year may be eligible to be used as a tax write-off
• Interest rates are typically much lower than those of military loans
• Borrowers can take up to thirty years to pay the loan back
• A portion of the loan is guaranteed by the Federal Government
The mortgage being refinanced need not be a VA loan. In fact conventional and FHA mortgage can be refinanced using the VA cash-out refinance program. Of course the borrower must be VA-eligible with ample entitlement in order to qualify for this veteran benefit.
Potential advantages to cash-out VA refinance loans over military loans are numerous. To find out more about military loans vs. cash-out VA refinance mortgages contact a VA loan specialist today.
