VA Cash Out Refinance - 100% LTV

4 Replies

Has anyone had experience with a 100% LTV VA cash out refi? I have been considering an IRRRL on my primary residence to drop the rate on my VA Jumbo loan, but received a flyer in the mail today advertising 100% LTV cash out (appraisal and income verification required) with the same rate I have seen on the IRRRL product. Sounds too good to be true. Curious to hear about experiences with this loan product, positive or negative.

Great question Brant. I would love to hear about this as well. I keep getting that mail marketing weekly but I am skeptical.Currently at 4.25 so I would love to do same to get about a .75% interest change and cash out to use for investing on a rental. 

@Brant Jones

Yes.  With a new appraisal.

Would you be able to find another property that would earn you more than the interest you would be saving?  If so, sounds like a good way to leverage your benefits.  Also, keep in mind the funding fee that will be added to the loan when running your numbers.

-David

@David Dye good point about the funding fee! That can quickly eat up some of the benefit of the cash out with regard to spread on the next deal. I have about $60k equity in my primary residence, so the opportunity to lower my rate slightly AND be able to reinvest that equity in another property (or two) is very attractive.

Originally posted by @Brant Jones :

@David Dye good point about the funding fee! That can quickly eat up some of the benefit of the cash out with regard to spread on the next deal. I have about $60k equity in my primary residence, so the opportunity to lower my rate slightly AND be able to reinvest that equity in another property (or two) is very attractive.

 HI David,

Yes you can cash out up to 100% of your market value of your home up to the county limits. How the difference is calculated after the county limits is the VA needs 25% of the difference above the county limits to be left (equity) so the VA loan is protected on very high loan amounts. So as an example in Redlands or riverside county the limit is 417k so if your home was 750k the difference from the two would be 333,000 X 25% = 83,250 (subtract this from the 750,000) so your max loan amount will be 666,750 on a 750,000 market value home.

With regards to the VAFF or VA funding Fee its 2.15% for first use and can be as high as 3.30% on the second use. To limit the cost of this you can raise your rate to absorb this 2.15 - 3.30% upfront fee that is normally financed into your loan but it will take significant rate increase to absorb this chunk. I estimate it will take .50% to .75% in rate increase on typical cases to absorb this. It will vary depending on if its your first use or second use.

Also there is a hack because if you absorb it, yes you'll end up with a higher rate temporarily but 6 months of good on time payments later you can always do a VA IRRRL down to market rate again and VA IRRRL (interest rate reduction refinance loan) have a much lower VAFF of .50% so its much easier to drop your rate. Obviously 6 months later you'll have to endure some interest rate risk as the market can change but sometimes this strategy is worth the risk, all things considered.

Let me know if that helps. 

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