Net Tangible Benefit (NTB) standards apply to all cash-out refinancing VA backed loans. The standards consist of three things: a NTB test, Loan Comparison, and Home Equity Disclosure. This blog post is for all the veterans, reservists, and active duty families we’ve helped get into a new home before. Please note that this information is for information purposes only and is subject to change.
NTB Test for Cash-Out Refinancing VA Loans
This requirement is met if any one of the following is satisfied by the refi loan, according to the Department of Veterans Affairs:
- The new loan eliminates monthly mortgage insurance.
- The loan term of the new loan is less than the loan term of the loan being refinanced.
- Interest rate of the new loan is less than the interest rate of the loan being refinanced.
- The monthly (principal and interest) payment of the new loan is less than the monthly.
(principal and interest) payment of the loan being refinanced.
- The Veteran’s monthly residual income is higher as a result of the new loan.
- The new loan is used to payoff the Veteran’s interim construction loan.
- The new loan LTV is equal to or less than 90 percent of the reasonable value of the
- The new loan is a refinance of an adjustable-rate mortgage to a fixed-rate mortgage.
Loan Comparison Disclosure for Cash-Out Refinancing VA Loans
Your lender has to give you a comparison of the new loan to the existing loan being refinanced. Plus, they have to generate two loan
comparison disclosures. One of the loan comparison disclosures has to be within 3 business days from the initial date of the loan. Then, you have to certify receipt of both disclosures.
Home Equity Disclosure for Cash-Out Refinancing VA Loans
Your lender also has to let you know exactly how much home equity is being removed from your home with the new loan within 3 business days from
the initial date of the loan application and at loan closing. The disclosure also has to explain how this removal of equity could affect the sale or refinance of the home down the road. Then, you have to certify receipt of the disclosure.
To learn about zero down loan limits for VA loans specific to New Mexico, check out our complimentary post.
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