The ads are appealing. They feature deals for vets to refinance their homes and cash out on the equity.
However, home and refinance loan programs targeted towards military veterans can be a benefit or a headache, depending on the lender.
John Bell, advisor for the Veterans Affairs Administration in D.C. says there are many reasons why vets can take advantage of borrowing cash against their home.
But how you choose a cash-out lender makes a big difference.
“We want to make sure that veterans are armed with information from the disclosure process early in the process as well as though closing, so they understand the decisions they're making,” he says.
Bell says, unfortunately, there are predatory lenders out there targeting vets, sticking vets with thousands of dollars in hidden fees.
“Have we seen it, yes,” Bell explains. “Do we know how to combat it and help you in navigating that process? Without a doubt.”
In 2018, the United States Department of Veterans Affairs stepped up its regulations for lenders, specifically on cash-out refinance loans. The VA has always offered advisor services to protect borrowers through their long-standing VA home loan program.
“We need to make sure that all lenders are operating on the same playing field, that they're all giving veterans the transparency that they need to make informed decisions,” Bell says.
According to a report by the American Enterprise Institute, in September of 2018, veterans cashed in on cash-outs. They accounted for 86 percent of mortgage loans, which was up about 30 percent from two years prior.
“The general rule is if it sounds too good to be true it usually is,” Bell says.
Bell says in order to not cause a mortgage crisis among vets, it's best if you know what you’re getting yourself into.
“Be sure you're asking the right questions,” he says. “You want to know the exchange of equity that you're going to take out, what is the overall cost of that, and make an informed decision.”