Case Study #10 – VA Cashout Refinance

The Client

  • Loan Type – Refinance 
  • Program – VA Cashout 
  • Loan Amount – $258,000 
  • Starting Rate – 3.875% 
  • Starting Payment – $1,301  
  • New Rate – 2.75% 
  • New Payment – $1,476  
  • Cashout – $56,360 

Client Requirement

Using his VA benefits, the client wanted to cashout some equity from his home to consolidate high interest credit card debt and do some home improvement. He wanted a much lower, fixed rate and wanted to keep his closing costs reasonable so he could maximize his cashout. It was also important for the veteran to keep his out of pocket expenses to a minimum. The goal was to try and save as much as possible per month. He wanted to do that by leveraging the equity in the home to restructure his debt and get into a better overall mortgage. The mortgage payment needed to be within budget even though his loan amount would be going up significantly.  

Loan Challenges

The big obstacle to overcome on this deal was making sure the client could qualify for a higher loan amount and higher payment based on his current income. Based on his current, outstanding debt, the debt to income ratio was on the high end. The other big thing was to make sure there as enough equity in the home to go up to the cashout limit of 90% loan-to-value, per VA guidelines.

The Challenges

  • Get the client qualified based on his current income.
  • Make sure there was enough equity to qualify fo the max cashout amount of 90% LTV.  
  • Ensure that the deal could get done, even with a high DTI.  

Our Solution

We pulled an AVM (Automated Valuation Model) on the property to determine upfront that the vale was what we needed and there were recent sales in the area to support the value we needed. We then structured the loan, assuming certain debts would be paid off, so that the make the debt to income ratio would work. Once we had the approval in hand, we shopped for the best rate against our group of partner lenders to secure the financing for the VA Cashout Refinance

The Results

Even though the monthly payments on the mortgage went up, our client was able to eliminate almost $700 dollars a month of other high interest debt. He will also be saving almost $50,000 during the lifetime of his new loan. He was also left with over $20,000 in cash to use toward home improvements. We were able to get all this accomplished in less than a month’s time.

  • Client was able to pay off $35K worth of debt and still had $21K left over for home improvement and upgrades.
  • The low rate we secured allowed him to save $48,159 in interest compared to his original loan.
  • He was able to save a total of $696 total per month by paying off all his debt even though his payment went up $175.
  • We closed in 29 days from our initial phone call.
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