Everything you need to know about HELOCs and VA cash-out refinancing.
Today, we’re discussing the advantages of both a Home Equity Line of Credit (HELOC) and VA loans, particularly in the context of a cash-out refinance. This will help you assess which option may be more favorable based on your needs.
Lately, there has been a surge in advertisements targeting veterans, urging them to tap into their home's equity. Moreover, there has been a notable increase in inquiries regarding the superior choice between a HELOC and a VA cash-out refinance among veterans.
The ultimate decision hinges on your goal, whether it's consolidating debts, addressing credit card balances, paying off student loans, or even working on a high-interest car loan. If the objective is debt clearance, particularly targeting credit card debts with interest rates exceeding 20%, a traditional cash-out refinance might make more financial sense. Even with the larger loan amount, the lower interest rate will likely yield greater benefits in debt settlement.
"Now is the perfect moment to tap into your equity."
However, if you're seeking funds for short-term home enhancements or contemplating selling within the next six to 12 months, or even envisioning a longer stay, a HELOC could prove more advantageous. While the interest rate is variable and slightly higher, the absence of payment obligations for an undrawn credit line, coupled with your existing low interest rate, might make it an ideal choice.
It's important to acknowledge some caveats linked to a cash-out refinance, such as waiting periods imposed by the Veterans Association before you can refinance your home again. Balancing these considerations is crucial, but if you believe it's the right time to reassess and tap into your home equity, now is an opportune moment.
In addition, HELOCs appear more advantageous when planning to renovate your property before listing it. A cash-out refinance through VA loans involves specific waiting periods (typically 210 days) before you can utilize this benefit again. HELOCs, on the other hand, offer flexibility with no prepayment penalties and generally shorter processing times.
The key here is preparation—understanding your goals and allowing ample time to secure the funds, carry out the renovations, and subsequently list the property in an improved state. If you have questions about this, please call or email us. We’d love to speak with you!