Refinancing Va loan with commercial loan

[Caleb Edwards]

Hi. Im looking to refinance a Va loan into a commercial loan and to quit claim the deed to my llc. Will this allow me to restore my full Va entitlement so that I can purchase another property with it? Also I know about the one time restoration but I'm trying to not use thaf

[Cara Lonsdale]

I am a bit confused by your post. It seems you may have a few things going on here. From what you say about quit deeding into an LLC, it leads me to believe that you would choose a commercial loan for the refi as commercial lending would allow the LLC to be the Borrower on title (as long as the LLC and/or property can qualify for the loan). Otherwise, I am confused why anyone would want to refinance a VA loan that traditionally has the same, or better rates than average conventional loans, and NO mortgage insurance requirement into a commercial loan that will require a bigger equity position, and higher interest rate.

Anyway, moving on.....

You can reuse your VA more than once. In fact, based on your service, your entitlement is a lifetime benefit that can be used over and over. In fact, in many cases, you don't have to payoff one before you use it again for another property, as long as you meet the owner occupied requirements. Once you have satisfied these, you could convert it to a rental property with the VA's blessing, and then purchase another home for yourself. This is allowed because each time you use your VA, it only uses about 1/4 of your entitlement, based on VA calculations of the portion that they guarantee.

When a property with a VA loan is sold, and the loan paid off, the entitlement can be restored. If not done automatically, this can be completed by submitting paperwork to the VA to have the original amount restored, which would most likely require proof that the other loan was paid off. Having sold or refinanced the VA loan to release the VA loan from the property, your payoff letter that you receive from the bank after the sale or refi should suffice for this requirement.

Lastly, why are you set on converting your properties to LLCs before they are paid off?  This is more of a curiosity question rather than a question of your decision.  I am an investor that uses a combo of both, so I am curious as to your strategy.

Investors often think that by moving property into LLCs, they are protecting themselves and their personal assets. However, you can also accomplish this through an umbrella insurance policy for liability. By going the umbrella insurance route and not the LLC route, you could have the best of both worlds by having your assets protected AND benefiting from lower interest rates and loan terms that the VA and other conventional financing provides. So, is there some reason why you are choosing to take on the extra expense of commercial financing just to put your properties in LLCs?