Home equity loans let homeowners turn the equity – or ownership – in their home into cash. Unfortunately, the Department of Veterans Affairs does not offer a VA home equity loan. But, homeowners with an outstanding VA loan do have alternatives. As such, we’ll use this article to outline VA home equity loan options.
Purchasing a home is a major milestone for many Americans, especially veterans transitioning to civilian life After years of serving our country, veterans deserve the opportunity to build a stable life and establish roots in a community.
For many veterans, tapping into home equity through a loan or line of credit can provide funds to make much-needed repairs, consolidate debt, pay medical bills, or finance other major expenses. With the right home equity loan, veterans can access their hard-earned home equity while keeping costs low.
What Makes a Home Equity Loan Good for Veterans?
Several factors make a home equity loan or line of credit ideal for veterans:
-
Special discounts and benefits Many lenders offer exclusive discounts, lower rates, and other perks to veteran borrowers. Credit unions and lenders with a military focus often provide the best deals.
-
Higher LTV ratios Loans with loan-to-value (LTV) ratios up to 100% allow veterans to tap all their built-up home equity. This provides maximum financing flexibility.
-
Low fees: Loans with no or low origination fees, application fees, and closing costs help keep borrowing costs down for veterans. Waived fees are ideal.
-
Easy application process: An easy online application process allows veterans to apply from the comfort of home on their own time.
-
Strong customer service: Responsive customer support teams that cater to veterans’ unique needs and questions provide a smooth borrowing experience.
The Top 5 Home Equity Loans for Veterans
Based on the above criteria, these are my top recommendations for veteran home equity loans:
1. Navy Federal Credit Union
As the largest credit union serving the military, Navy Federal offers exclusive equity loan benefits to veteran members.
Key features:
- Borrow up to 100% of your home’s value
- $0 in closing costs
- Rate discounts with auto-pay
- Credit scores starting at 620
- Loan amounts from $10,000 to $500,000
With high LTV ratios, discounted rates, and no closing costs, Navy Federal makes it inexpensive to tap into your full home equity. Generous loan amounts meet a wide range of financing needs.
2. PenFed Credit Union
The PenFed home equity loan also provides maximum financing and discounts to veteran members.
Key features:
- Up to 100% LTV financing
- No origination fees
- Interest rate discounts
- Credit scores starting at 660
- Loan amounts up to $510,400
Like Navy Federal, PenFed offers full financing, no origination fees, and exclusive military discounts. The PenFed home equity loan is a great pick if you need to maximize your equity.
3. Veterans United
Veterans United is a VA-approved lender specializing in loans for veterans and military families. Their home equity loan stands out for its competitive fixed rates.
Key features:
- Low fixed interest rates
- 90% LTV financing
- $0 origination fees
- Credit scores starting at 620
- Loan amounts from $7,500 to $453,100
Though maximum LTV is lower, Veterans United offers very competitive interest rates to keep monthly payments affordable. With no origination fees, borrowing costs stay low.
4. USAA
USAA is one of the top lenders catering to military members and veterans. Their home equity loan offers discounted rates and flexible terms.
Key features:
- Rate discounts for USAA members
- 80% LTV financing
- $0 fees for prepayment
- Credit scores starting at 620
- Loan terms from 10 to 30 years
USAA provides discounts to USAA members along with flexible 10 to 30-year terms. Just be aware maximum LTV is lower at 80% of your home’s value.
5. FinFit
FinFit isn’t a lender but a lending marketplace connecting borrowers with real lenders. Veterans can easily compare home equity loan options.
Key features:
- Compare loan offers from multiple lenders
- Loans structured around VA benefits
- Protection for disabled veterans
- Credit scores starting at 580
- Loan amounts from $7,500 to $417,000
FinFit streamlines shopping for a home equity loan, letting you easily find and compare offers tailored to VA benefits. More flexible credit requirements help a wider range of veterans qualify.
What Are the Pros and Cons of a Home Equity Loan for Veterans?
Though home equity loans offer veterans a number of benefits, there are also some potential drawbacks to consider:
Pros
- Access built-up home equity
- Available for almost any purpose
- Fixed rates and payments
- Potential for lower costs than alternatives like credit cards
Cons
- Adds another monthly loan payment
- Can’t re-borrow funds you repay
- Puts your home at risk if you default
- Closing costs, though sometimes waived
Being aware of both the advantages and potential risks will help you make a fully informed decision.
Home Equity Loan Requirements for Veterans
While requirements vary by lender, here are some typical eligibility standards for veterans applying for home equity loans:
- Minimum credit score around 620
- Monthly income sufficient to cover payments
- Loan-to-value ratio up to 100%
- Debt-to-income ratio up to 50%
- On-time mortgage payment history
Having an existing VA home loan could also fulfill credit and underwriting requirements.
How Veterans Can Get the Best Home Equity Loan Rates
As a veteran, you can take a few steps to score the lowest interest rate on a home equity loan:
- Shop around: Compare quotes from multiple lenders to find the lowest rate.
- Boost your credit: Maintaining a credit score over 740 may qualify you for better rates.
- Opt for autopay: Enrolling in autopay from your checking account can earn a rate discount.
- Choose shorter terms: You’ll often get a lower rate with a 5 to 10-year term versus a 30-year one.
- Provide documentation: Bring documents like W-2s, paystubs, and bank statements showing reliable income.
- Use a co-signer: Adding a co-signer with better credit can help you qualify for prime rates.
Comparing quotes and taking steps to improve your rate offers veterans the opportunity to get approved at highly competitive interest rates.
What Loan Amounts Are Available?
Depending on the lender, available loan amounts for veterans typically fall anywhere between $10,000 and $500,000. Generally, the more equity you have built up, the higher the amount you can borrow.
Lenders also set maximum loan-to-value ratios limiting how much equity veterans can leverage with a home equity loan. These maximum LTVs often fall between 80% and 100%.
So for example, if you have a home valued at $300,000 with $100,000 left on your mortgage, you have $200,000 in equity. A lender that offers a 90% LTV home equity loan would approve you up to $180,000.
How Fast Can Veterans Get Financing?
After submitting a complete home equity loan application, veterans can often get approved in as little as 1-2 weeks. However, it takes longer for the loan to fund and close. The entire process of getting your financing usually takes between 30 and 60 days.
Here are some factors that affect the funding timeline:
- Home appraisal – Takes 1-2 weeks to complete
- Title search and insurance – Usually 1 week or less
- Loan underwriting – Can take 2-3 weeks with a VA loan
- Closing scheduling – Depends on closing agent’s availability
As you can see, most of the timing depends on the appraisal and underwriting steps conducted by third parties. Applying with an online lender can help streamline the process and get you funding faster.
Alternative Ways for Veterans to Tap Home Equity
Beyond standard home equity loans, veterans also have a few other options to leverage equity:
Home Equity Line of Credit (HELOC)
HELOCs offer revolving credit lines up to 85% of your home’s value. You can draw as needed and rates are variable. This adds flexibility but less predictability.
Cash-Out Mortgage Refinance
You can tap equity by refinancing into a larger mortgage. This replaces your entire home loan instead of adding a second lien. It lets you pull equity out at low fixed mortgage rates.
Reverse Mortgage
Reverse mortgages allow homeowners 62 and older to convert equity into tax-free income. This option doesn’t require monthly payments so it helps seniors on fixed incomes.
Each alternative has pros and cons for veterans to weigh based on their goals and financial situation.
Finding the Best Home Equity Lender for You
As a veteran, the most important thing is finding a home equity lender that offers the loan features and service that best match your needs. Here are some key questions to ask yourself:
- How much equity do I need to borrow?
- What rates and fees seem most
VA Cash-out Refinance Loan
As an alternative to home equity loans, borrowers can access equity in their homes with a VA cash-out refinance. A cash-out refinance uses a new loan to pay off the balance of your current mortgage, with the difference between the new one and old one available as cash.
To demonstrate, we’ll use the above numbers. With a home value of $400,000 and current mortgage of $250,000, a 90% LTV cash-out refinance would equal $360,000 ($400,000 x 90% LTV). But, the first $250,000 of the new loan would pay off the old loan. Then, borrowers would pocket the remaining $110,000 as cash (ignoring closing costs).
Due to this pay-off characteristic, these cash-out refinance loans qualify as first-lien, not second-lien, which is why the VA offers them. And, borrowers can refinance a non-VA or VA loan with a VA cash-out refinance loan.
According to the VA, with a 100% LTV refinance, you can borrow up to the Fannie Mae/Freddie Mac conforming loan limit in most areas – and more in some high-cost counties. However, not all VA-approved lenders will offer 100% LTV on cash-out refinances. Accordingly, you’ll need to discuss loan details with your lender.
See What You Qualify For
Select a VA Home Loan Option to Continue:
HELOC Vs Home Equity Loan: Which is Better?
FAQ
Does the VA give home equity loans?
What is the best HELOC for veterans?
|
Lender
|
Rates (APR)
|
|
Armed Forces Bank
|
6-month intro rate of 5.99% for 6 months, then 8.49% variable
|
|
PenFed Credit Union
|
8.625 – 18.00% fixed
|
|
Figure
|
8.45% – 16.65% fixed
|
|
Hitch
|
8.25% – 13.00%
|
Which bank is best for a home equity loan?
|
Lender
|
Bankrate Score
|
Term Lengths
|
|
Discover
|
4.4/5
|
10-30 years
|
|
U.S. Bank
|
4.2/5
|
Up to 30 years
|
|
TD Bank
|
4.1/5
|
5-30 years
|
|
Regions Bank
|
3.8/5
|
10-20 years
|
What credit score do you need for a VA home equity loan?
Can veterans get a home equity loan?
Veterans who want to access their home equity for cash should consider a VA cash-out refinance loan. Veterans can still get home equity loans on their own, but this creates a second lien on the property and doesn’t take advantage of the VA loan’s unique benefits. Is there a VA home equity line of credit (HELOC)?
What are VA home equity loans?
Before discussing VA home equity loans, we need to provide a brief overview of a related concept: first- and second-lien loans. With a traditional home mortgage, borrowers use loan proceeds to purchase a home. As a result, these loans qualify as first-lien loans.
Does the VA guarantee a home equity loan?
A home equity loan helps people who already own homes, so it’s not in the scope of the VA’s core mission. But even though the VA doesn’t guarantee home equity loans, you can still borrow from an independent lender, while keeping your VA home loan as your first mortgage.
How do I get equity out of my home with a VA loan?
If you have a VA loan and are wondering how to get equity out of your home, you’re in luck: you can use a home equity loan, home equity line of credit (HELOC) or VA cash-out refinance. All of these options will put cash in your pocket that you can use for anything you choose.