Refinancing out of a VA Loan

17 Replies

I purchased a duplex in 2011 with a VA loan, both sides are now rentals love the property but as we are starting to get more serious about building a real estate profile, I am wanting to get this property under a LLC. I am assuming the only way you can go about that would be to refinance it under the company name. I have read many threads about refinancing out of a VA loan to a conventional loan and you would need 20% - 25% down, is that true if you are wanting to refinance into an LLC or would I be looking at closer to 30% down?

Originally posted by @Ginger Walker :

I purchased a duplex in 2011 with a VA loan, both sides are now rentals love the property but as we are starting to get more serious about building a real estate profile, I am wanting to get this property under a LLC. I am assuming the only way you can go about that would be to refinance it under the company name. I have read many threads about refinancing out of a VA loan to a conventional loan and you would need 20% - 25% down, is that true if you are wanting to refinance into an LLC or would I be looking at closer to 30% down?

 Ginger,

Have you gotten more info on this and/or were you able to refi out of the VA?

No, I do not have further information. We have not refinanced out yet and probably won't for a few years. We do not currently have enough to put down 20 - 30% and when we do raise the funds we would prefer to invest in another property instead.

On a refi, you don't necessarily need a "down payment" because you've likely gained equity through both improvements to the property and natural appreciation. 

Do you have 25% equity based on appreciation & improvements since you purchased in 2011?

Thanks Chris, unfortunately the property was a new build and we haven't made any improvements. The area has not appreciated over the last 5 years and some finance fees were financed into it so we have not built up much if any equity.

Originally posted by @Ginger Walker :

Thanks Chris, unfortunately the property was a new build and we haven't made any improvements. The area has not appreciated over the last 5 years and some finance fees were financed into it so we have not built up much if any equity.

Interesting conundrum and one that I worry about as VA financing on a MF is the path I want to go. I wonder if the $ used to obtain a conventional refi to free up the VA would be better spent in that regard as the benefits of using the VA (may) outweigh using a conventional for your next purchase? No PMI, better rates, etc mean $100s saved in payments each month.

You may want to speak to a mortgage specialist in your area about moving the property into an LLC. I specifically asked my current broker (a former VA underwriter) about this the other day, and she said I could just do a quick claim into an LLC in the future (I'm currently under contract on an investment property and a VA property). I didn't specifically ask about a similar situation as to yours, however based on our conversations I don't think I'd have to refi to get my VA loan into an LLC. That could just be in my area too, I'm in GA.

Originally posted by @Matthew Coleman :

You may want to speak to a mortgage specialist in your area about moving the property into an LLC. I specifically asked my current broker (a former VA underwriter) about this the other day, and she said I could just do a quick claim into an LLC in the future (I'm currently under contract on an investment property and a VA property). I didn't specifically ask about a similar situation as to yours, however based on our conversations I don't think I'd have to refi to get my VA loan into an LLC. That could just be in my area too, I'm in GA.

I'm thinking that is "quit claim" instead of "quick". I'm wondering how the LLC would free up the VA monies... Would be neat if you could...Vets could could perpetually purchase, wait a year, then roll to LLC...in theory.

Ahh, yes, you are right @TJ P. I don't believe a quit claim would free up the VA entitlement, however a refi out of the VA would. That was actually my specific question that I had asked her.

Another strategy I have seen is having your RE attorney create a land trust that is owned by an LLC. You can place a property in a land trust without the bank ever knowing as they would if you transferred a property into an LLC. Placing a property in a land trust is just recorded on the trust paperwork and kept in your desk or filing cabinet.

Originally posted by @Greg Cooksey :

Another strategy I have seen is having your RE attorney create a land trust that is owned by an LLC. You can place a property in a land trust without the bank ever knowing as they would if you transferred a property into an LLC. Placing a property in a land trust is just recorded on the trust paperwork and kept in your desk or filing cabinet.

How does that free up the VA loan? Or did I miss something?

I wasn't necessarily talking about freeing up VA funds, but Ginger's original post expressed that she wants to get her property into an LLC and thought that the only way to do it would be to refinance out of the VA loan. To my understanding, if your goal is to free up VA money, you must refi out of it in order to get another VA backed mortgage.

If @Ginger Walker 's primary goal is to move a property financed with the VA loan into an LLC, I think a RE lawyer could set up her entities to do that without any refinancing or more money down.

Is your goal to move into another property with a VA loan?

You don't have to refinance out, I don't think, if you have entitlement left.

You didn't give any specific numbers, but let's assume the duplex was 200K.  

You could still have potentially (assuming NO equity in the property and without refinancing) purchase another property for approximately 217K with no money down (excluding the "high cost" county areas which, if you live in one of them, could provide more than that for you).

Do some more research here:  http://www.benefits.va.gov/homeloans/purchaseco_lo...

Also, a confused mind says no.  Go to a local bank and ask to talk to the lender.  Tell him or her what you want to do.  I think the information may surprise you in terms of your options.

The good thing is, since your original post, you now have 7 months more of equity in the duplex.

Keep rockin'.

@Chris M. makes a great point, you could still use FHA....

I think a combination of the options discussed here could achieve the original goal. Refi out of the VA loan, freeing up the VA entitlement, then place into a LLC land trust, thereby placing the property into an LLC.