Aloha! As Hawaii’s longest-running VA loan-specialized lender, we believe in keeping our customers (and future customers!) updated on all topics related to VA purchases and refinances. When it comes to your Hawaii home investment using your VA home loan benefits, you can trust Hawaii VA Loans to always keep you current and informed on updates from the Veterans Administration (VA) and the Hawaii real estate market.
Recently, the VA has changed Cash-Out guidelines for loans with applications taken after February 15, 2019.
A VA Cash-Out refinance gives borrowers an opportunity to take cash out of their home equity or refinance a non-VA loan into a VA-backed loan. Taking cash out of your home equity may help to pay off debt, pay for school, make home improvements, or take care of other needs.
The new rules are outlined below.
- VA Cash-Out refinances have now been divided into two categories:
– a refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced (VA or not).
- Max LTV (loan-to-value) = 100% which includes the funding fee within the 100%
- Fees must be recouped within 36 months
– a refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced.
- All Cash-Out refinances must meet the Net Tangible Benefit test (at least 1 of 8):
- Eliminates Mortgage Insurance – the new loan eliminates monthly mortgage insurance, whether public or private, or monthly guaranty insurance.
- Reduced Loan Term – the term of the new loan is shorter than the term of the loan being refinanced.
- Lower Interest Rate – the interest rate on the new loan is lower than the interest rate on the loan being refinanced.
- Lower Payment – the payment on the new loan is lower than the payment on the loan being refinanced.
- Increase Residual Income (i.e. – debt consolidation) – the new loan results in an increase in the borrower’s monthly residual income
- Pay Off a Home Improvement or Construction Loan – the new loan refinances an interim loan to construct, alter, or repair the home.
- Adjustable to Fixed – The new loan amount is equal to or less than 90 percent of the reasonable value of the home.
- LTV less than or equal to 90% – the new loan refinances an adjustable rate loan to a fixed rate loan.
- New disclosures will be issued to the veteran at origination and closing with the same timetable restrictions as IRRRLs (a refinancing loan made to refinance an existing VA-guaranteed home loan at a lower interest rate).
- The VA will not guarantee a refinancing loan if the loan being refinanced has not been properly seasoned. This requirement applies to TYPE I refinancing loans made to refinance an existing VA-guaranteed home loan and all TYPE II refinancing loans. A loan is considered seasoned on the later of the date that is:
- 210 days from the day the 1st payment posts with the lienholder; and
- at least 6 payments have been made.
1st Payment Date Example:
If the first payment due date is February 1st, but is not received by the lender and credited until February 6th, the clock starts as of February 6th. Day 1 would be February 7th.
Note: The above new revisions are in effect on all loans with origination dates 2/15/19 or later.
Please don’t hesitate to contact us with any questions about these revisions and our popular cash-out refi program: the Hawaii VA Loans “Equity Plus” Refinance program! If you’d like to begin with either a purchase or refinance, you can get started here. Our VA Loan Specialists are ready to help!