In the second quarter of 2017, American homeowners gained more home equity.In a CoreLogic report, there was an impressive 10.6 percent increase in equity on the year-over-year basis among homeowners with mortgages. This translates to $766 billion worth of gains.
What is Home equity? Why is it Important?
It’s simply defined as the net current value of a home minus any mortgages and liens tied to the property. As the mortgages or liens are paid down, the home equity figure moves up. Another factor that can influence home equity is the movement in home values.
How Can Home Equity Help You?
If you’ve increased your home equity significantly, you can borrow from it. Homeowners can take advantage of home equity loans as it allows to turn your equity into cash and use it for any purpose.
The money loaned can be used to fund a college education, do home renovations and may other things. However, since this is still debt that needs to be repaid, it is wiser to use this financing towards something that yields higher returns. Long term investments can be a good example.
The equity serves as a collateral for this kind of loan, It usually is taken as a second mortgage.This financing usually has a low interest rate.
Does VA Offer Home Equity Refinance?
Unfortunately for Veterans looking for a “VA Home Equity Refinance,” no such thing exists. However, there is a better alternative.
Veterans Affairs have VA Cash-out Refinance Loan.
This program allows homeowner Veterans to refinance their existing mortgage while taking out cash. This extra money can also be used for any purpose. The great thing is, your home equity isn’t put as collateral.
VA Cash-out Refinance
In a VA Cash-out Refinance you can:
(1)refinance to a new loan which is larger than the current loan. After fees and charges have been deducted to this new loan, proceeds then will go to you, and
(2)completely pay off a non-VA mortgage loan. This also where the shift from a non-VA to a VA loan happens.
The maximum loanable amount in this program is up to 100% of the property’s value (up to 100% LTV). With that being said, a new property appraisal needs to be done to establish the new value of the home.
Quick Glance: VA Cash-out Refinance
|Refinancing an old VA loan||Yes|
|Refinancing a non-VA loan to a VA loan||Yes|
|Interest Rate Reduction||Yes (except for some ARM-to-Fixed-Rate cases)|
|Property Occupancy Requirement||Borrower must currently occupy|
|New Property Appraisal||Required|
|Funding Fee (unless exempt)||2.155 to 3.3%|
|Maximum Loan to Value||Up to 100%|