3 easy refinance questions I can't find anywhere

[Peter Kim]

1. When you decide to refinance, is it the appraiser that determines how much the home is worth? 

2. Let's say you bought the house for 80K and you refinance for 100K (fake easy numbers). After paying that initial 80K loan off, can that extra 20K be used for anything or does it have to be expenses related to that specific home? 

3. VA Loan specifically, if I were to refinance from VA to conventional I'm guessing I would have to pay 3.5% minimal of the new loan?

[Matt Devincenzo]

1. The appraisal determines a reasonable expectation of value based on area comps. So they do assign a value, but that doesn't mean that is what the home is worth. Since there is no sale on a refinance, they are using their best judgement to determine what the value should be if it sold, so you can end up with inaccurate appraisals at times. But for simplicity yes the appraisal will determine what the home is worth on a refi. 
2. You can in theory use the additional 20K for anything. But if you use it for non house related expenses then you shouldn't deduct the interest from the 20K portion on your taxes. Most people don't do this correctly, but that is the guidance.
3. I'm not sure I understand the 3.5%? Is this your assumption on the downpayment? There's more to it than this. First (easy numbers) you buy for 100K and you use the VA 0% down. Now a year later you want to refi and area comps are 105K. Assuming you still plan to OO the property then you could refi as a ~95% LTV conventional. The 105K value will increase your equity so that you may not need to pay the loan down at all. If you moved out and were renting the property and you wanted to refi to a NOO conventional, then you would need to get to 85% LTV for a SFR which would mean paying down the loan to ~89K +/-.