VA to conventional + cash out - anyone done it?

Question

I'm not finding anything on this topic in the search...has anyone ever done a cash out refinance (to conventional loan) on a VA mortgage?

My initial thought is that other options would be to keep the home and get a HELOC, sell the home and 1031 into something else, refi into an IRRRL (if that's even possible on non owner occupied VA loans), or something else I'm not even thinking of?

If it's relevant - the home was purchased at just over $200k and 100% financed at 3.75%. Based on comps it is now likely worth $375-$400k. I moved out in in 2017 and while the home has been a good rental, it is certainly no cash cow. Also STR is likely not an option, as they are prohibited in this part of FL.

What would you do it your main goal was to tap into appreciation to purchase more rentals? Looking forward to hearing everyone's thought's....thank you in advance!

Daniel Hennek · Answer

Of course you can cash out and pay off a VA mortgage with a conventional. If you want cash out you can certainly get a conventional mortgage provided you meet all other requirements. IRRRL is not cash out, but CAN be used to reduce your rate on a property you no longer occupy if the current loan is a VA loan. If you can't get cash out you should probably still do an IRRRL if you're keeping the property, and should have done one about 20 months ago based on the rate you quoted.

A HELOC might cost you more than refinancing to a lower rate with the addition of cash out. Do the math on the rates and how much interest you'll pay. Most people opt for a cash out and keep it all in one loan because they don't like the variable nature of a HELOC.

A HELOC might cost you more than refinancing to a lower rate with the addition of cash out.  Do the math on the rates and how much interest you'll pay.  Most people opt for a cash out and keep it all in one loan because they don't like the variable nature of a HELOC.

Albert Bui · Answer

Pros of cash out refinance or refinance from VA to Conventional:

- you free up your VA entitlement to be utilized fully on another property, house hack, or purchase

- at 3.75% current rate by refinancing into conventional your current rate wouldn’t go up too much more than this but it will be higher (assuming cash out refinance) as of 1/23/22

Cons:

- closing costs, new conventional loan with possibly higher rate

Ultimately like the above reply mentioned it depends on your situation. Your current note is at around 50% LTV (IE 200k loan with 400k value) so you do have some equity to tap into, roughly 25% LTV available given that the max cash out on conventional for an investment property is 75% LTV on 1 unit and 70% on 2-4 unit.

The question to be asked would be:

- what does this 25% LTV represent ? (100k potential)

- what will it cost per month in the new PITIA or new monthly payment (principal/interest/taxes/insurance/assessments)?

- will I still cashflow to my financial goals?

- what can I do with this 100k potential or how can I redeploy it because ill be paying interest on these funds till I have them placed and the money is finally working for me again…

Hope that helps,

Joseph Holliway · Answer

I am currently in the process of a cash out refi from a va loan. Like Daniel said run the numbers and see what is more profitable for you and your goals. I am converting my loan to an investment property loan which does carry a higher interest rate that I can buy down but doesn’t offset the amount I would make by using the difference in another property over 30-years. It is all about what lines up with your goals.

Andrew Postell · Answer

@Kelly Roberts yes, you can absolutely have a cash out mortgage.  You're probably not finding much because the underlying note is not of consequence.  So if the loan is a VA, FHA, USDA, conventional loan, etc....it doesn't matter.  Well, 99.9% of the time none of it matters.  There's probably some weird exception of the mortgage being modified because of a bankruptcy that might not allow it....but everything else is fine. So just research a "standard" cash out refinance and that's all you need to research.  As long as you have the LTV and other qualifications the underlying VA loan doesn't matter. Hope all of that makes sense.

VA to conventional + cash out - anyone done it?

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