VA Refinance Loans: Cash-Out vs. No Cash-Out

VA refinance loans refer to loan programs available to military veterans and active duty personnel. Qualifying applicants can opt for either a cash-out or a no cash-out loan, and different situations determine which is the most beneficial. Much of the determining criteria is based on whether keeping the equity in the home as much as possible is the most advantageous.

Cash-Out Loan

The main reason behind choosing a cash-out loan is to lower the interest rate on the monthly mortgage payments, as well as receive a lump sum based on the existing equity in the home. Many applicants choose this option due to high expenses in other areas, such as medical bills, college tuition or high-interest credit card debt. Depending on the home's existing value, some borrowers can receive the payment that equals the home's total value. It is recommended that you consider this option carefully because funds are directly taken out of the home's equity.

No Cash-Out Loan

A no cash-out loan is simply a restructuring of the mortgage plan in order to lower the interest rate on each monthly payment. This option does not result in a lump sum, though the savings that result from lower payments can be budgeted towards paying for other expenses. No cash-out loans are recommended in cases in which keeping equity in home is the most financially practical.