Updated almost 8 years ago on . Most recent reply
VA Refinance + 95% HELOC + NOO LOC
First post. I need some help. The intent here is to purchase a new primary residence. I currently have 2 VA loans. One on a property in Colorado, another on a property in Washington.
- Colorado: 130M balance, 3.375%, LTV ~51%
- Washington: 262M balance, 3.875%, LTV ~60%
Maximum Loan Limits in Snohomish & King Counties: $667M
My idea to leverage myself into a new primary residence is in 3 parts.
- Refinance the WA property to conventional financing to free up VA eligibility and back it up with a 95% equity line of credit from SDFCU.
- Draw a NOO equity line on the CO property
- Use both equity lines for a downpayment on a new primary residence financed with VA funding
- My question is, does it make sense to refinance the WA property for the benefit of VA eligibility on the new purchase? Or would it be better to maintain the current low VA rates and hope for the best on new conventional financing?
- I'm also considering looking for multi-family units. Max VA on a 4 unit property is $1.282MM and my understanding is I would only have to qualify for 1/4 of the loan amount, using the rents for the remaining 75%.
Most Popular Reply
HI Jesus,
You have great rates above.
The current rates in the market are much higher from lower 4's to 5's if we're talking about non owner conventional 2-4 unit properties.
Even owner occupied VA 4-plexes are around mid 4's.
There are going to be multiple schools of thought here because there are multiple variables.
On one hand you can refinance the VA loans into conventional. This will increase your current mid 3% rates into higher 4% rates so we'd have to do the math on it to see if by restoring your VA entitlement it will be worth the extra "premium," paid in rate and closing costs to refinance are worth it. It would only be worth it if your VA entitlement was used to purchase something that had a higher return than what your cost was to refinance one of your above mentioned properties.
The other consideration is, what are those loans above? Are they 30 year fixed or 20, 25, 15 yr fixed? The reason I ask is because your payment on those loans may affect your debt to income (DTI) so by converting a 15 year fixed into a 30 year fixed even with a higher rate you could achieve a lower monthly payment and by doing so you quite actually qualify for more. This would only be an advantage if you're tight on qualifying income but if you make big $$$$ in your day job then you may not need to refinance for the sake of managing your DTI.
Also on VA, the limit for 0% down in snohomish, King, and pierce is actually 667,000 and you can qualify for a property that is higher than this but you'd have to bring in 25% of the difference above this limit in terms of "down payment." As for rental income, you can use 75% of rental income from the other 3 units (assuming a fourplex) and you live in one of the units.
Its important to note that the rent from the 3 units is added to your income to qualify (less advantageous calc method) and is not used to offset the mortgage (more advantageous calculation).
Also you have two current loans outstanding VA loans that have 67% of your 667k limit tied up. This means you could do up to 0% down up to only 33% of 667,000 (king,snohomish/pierce) = $ 220,000. With out refinance any of the other VA loans you'd have to bring in 25% of the difference above this 220,000 example if you're talking about a purchase in these three counties in WA. Partial entitlements with VA can be super technical so its good to have a game plan first.
There are a couple other considerations but with out knowing your situation no can really know what to suggest.