VA Refinance of Rental Property to Increase Cash Flow

Buying a home with a no money down VA loan is reserved just for a primary residence. But, did you know that a VA loan rental property streamline refinance is possible? It sure is! Not all Veteran homeowners decide to sell their home when buying another. Instead, some choose to rent out the property. Actually, it is allowed for homeowners to keep the existing VA loan even though the Veteran moves out.

VA loan rental property
Increase cash flow by refinancing your VA interest rate on rental properties

VA Loan Rental Property Streamline Refinance

Many are aware of the VA IRRRL which stands for a VA Interest Rate Reduction Refinance Loan. It allows homeowners with a current VA loan to refinance without a VA appraisal plus requires very limited documentation. Although most believe this is restricted only to a primary residence, it is allowed for rental properties. Actually, as long as the Veteran certifies through the VA loan paperwork that he or she previously occupied the property as their primary residence, then it would be eligible for a VA streamline refinance loan.

VA Loan Rental Refinance Advantages

There are several cool reasons for using a VA IRRRL to refinance a rental property. These include the following:

  • No appraisal
  • No equity required
  • Monthly mortgage insurance is not required
  • Primary residence interest rates
  • Lower monthly payment and interest rate
  • Reduced VA funding fee (waived for disabled Veterans or Purple Heart recipients)

The only other loan option would be a conventional Fannie Mae or Freddie Mac refinance loan. Although, a VA loan rental refinance loan has many advantages, it does not offer a cash out refinance. Yet on a primary residence, it is possible to use a VA cash out refinance loan up to 90% of the appraised value. Furthermore, a VA refinance continues to tie up VA entitlement. Thus, some choose a conventional refinance to free up full VA entitlement again. Doing such potentially allows for another no money down purchase using a VA loan with no limit.

Free Up VA Entitlement

As mentioned above, using a VA loan to refinance a rental has many advantages. In case you don’t know, it is possible to have two VA loans at once. This is called bonus entitlement. But at a certain price level, down payment is required. So, there are times where it is beneficial to pay off the VA loan with a conventional loan. Therefore, freeing up VA entitlement. Very helpful to buy with no money down. Without selling the house, the Veteran will need to complete a restoration of entitlement after the loan is paid off. Keep in mind that a rental property conventional refinance loan will allow a maximum of 80% of appraised value.

Do you have questions about a VA refinance? Reach out for answers!

Russell Smith Mortgage Lender

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Written By: Russell Smith

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