Question:

Is there a cash-out max loan amount formula that determines the highest amount of loan that can be taken on a VA refinance?

Answer:

There is no formula as such, to calculate the maximum amount of money you can "cash out" on a VA refinance. However, the amount is limited by the lesser of the value of the house, or the VA upper cash out limit of $417,000.

Earlier it used to be that the maximum allowable loan amount was the lesser of 90% of the appraised value of the new mortgage, or $417,000. Now, this limitation has been removed and loan can be taken against 100% of the value of the house.

Another limiting factor is that most major lenders/investors want at least 25% of the new loan to come out of the borrower's equity in the house and the VA entitlement (which is up to $36,000 for a cash-out refinance). So the actual amount of cash out loan that you can apply for is limited by this factor as well.

Note: to find out how much entitlement the veteran has available, check the Certificate of Entitlement

Calculating the Cash Out Max Loan Amount:

Calculating the cash-out max loan amount is fairly simple. All you need to know is the appraised value of the house (which has to be less than $417,000) and the VA entitlement, and you are good to go.

An example will better illustrate this concept.

Example:

Consider a house with an appraised value of $200,000 with 20% equity belonging to the homeowner, and a VA entitlement of $25,000.

We know that 25% of the max cash out loan amount needs to come from equity and entitlement,

So, 25% * (cash out max loan amount) = (20% * $200,000) + $25,000
Or, 25% * (cash out max loan amount) = $65,000

Therefore, Cash out max loan amount = $65,000 * 4
Cash out max loan amount = $260,000

It is important to remember here that the VA charges a 3% fee for this program; however, it can be rolled into the total loan amount.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
Link:
Why: Because FHA loans are insured by the US Federal Government they have very competitive interest rates and are easier to qualify.
Link:
Why: Know and protect your credit report and score.
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
Link this QnA Print del.icio.us Digg
Was this Mortgage QnA helpful?
Not at all
  • Currently 3/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
 Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA:

Common misspellings: mortage and morgage