Are VA Loans Available for Boats and RVs?

The VA does not allow borrowers to use a VA loan to finance a boat or RV purchase – even if you plan on living in the vehicle. However, borrowers can use one of the VA’s loan refinance options to purchase a boat or RV.

VA Loan Overview

The VA loan offers eligible veterans and service members a competitive mortgage option with the following terms:

• No down payment required
• No private mortgage insurance (PMI) required
• Low interest rates
• Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

The VA loan program exists to help veterans purchase a home to use as their primary residence. The VA imposes strict criteria – called minimum property requirements – to determine what constitutes a primary residence.

While these criteria can get complicated, they ultimately boil down to one disqualifying factor for boats and RVs: borrowers may only use a VA loan to purchase real property with a fixed foundation.

Since boats and RVs don’t have fixed foundations, the VA doesn’t consider them real property, so they do not qualify for VA loan purchases, according to the VA’s lender handbook.

VA Loan Cash-out Refinance

While VA lenders won’t provide direct VA loan financing to purchase a boat or RV, they may allow eligible homeowners to take advantage of the VA loan program’s cash-out refinance option on another property.

The VA’s cash-out refinance option allows you to refinance your existing home loan into a larger one, withdrawing your home’s equity as cash.

While every VA-approved lender offers different terms, you may be able to borrow up to 100% of your home’s current value when you refinance. You can use this cash to purchase a boat or an RV, while enjoying the benefits of VA loan financing on your original home purchase.

Remember that your interest rate and other loan terms will change during this process.

Using VA Loan Cash-out Refinance Proceeds to Buy a Boat or RV

If you’re a veteran or military homeowner with equity in your home, the VA cash-out refinance program is one indirect strategy to finance a boat or RV purchase.

While the VA has guidelines on who qualifies for a cash-out refinance, it doesn’t tell borrowers how to spend their cash-out proceeds. If you want to use yours to buy a 30-foot catamaran, you’re well within your rights.

Remember, you don’t have to refinance into a new 100% loan-to-value mortgage. Just because you have $300,000 in equity doesn’t mean you have to use it all. Instead, you can refinance into a smaller amount.

For example, say the boat of your dreams costs $50,000, and you have a current mortgage balance of $200,000. For a cash-out refinance, it doesn’t matter whether that’s a conventional or VA loan mortgage.

Following a VA appraisal, let’s say your home is worth $300,000. This means you have $100,000 in equity in your home ($300,000 appraised value minus $200,000 mortgage balance). So, you could refinance your home for a $250,000 VA mortgage, taking $50,000 out in cash to buy your boat while keeping your monthly payments lower than they would be with a $300,000 mortgage.

VA Cash-out Refinance Eligibility Requirements

To qualify for a VA cash-out refinance loan, veterans must meet all of the following requirements:

• Qualify for a VA home loan, as demonstrated by your Certificate of Eligibility (COE)
• Meet VA and lender income, credit score, debt-to-income ratio and other financial requirements
• Live in the home you’re refinancing as a primary residence

The VA’s occupancy requirement might pose an obstacle to this strategy if you are hoping to take up residence in your boat or RV immediately. If you intend to use your cash-out VA refinance loan to purchase a boat or RV to use as a home, you’ll have to wait at least a year to move into it.

Should I Use a VA Cash-out Refinance to Buy a Boat or RV?

Just because a borrower can pursue this cash-out strategy doesn’t mean it’s the best choice. Before using VA cash-out refinance proceeds to purchase a boat or RV, veterans and service members should think about these additional considerations:

• Increased monthly payments: When you refinance into a larger loan, you’ll have larger loan payments. Assuming 3.5% interest and a 30-year loan, the monthly principal and interest payments for a $300,000 loan would be roughly $450 more per month than a $200,000 loan.
• Increased total interest payments: Interest represents the amount you pay to a lender for the privilege of borrowing money. Most borrowers want to minimize their mortgage interest payments. Borrowers will pay roughly $57,000 more in interest over the life of a $300,000 loan than with a $200,000 mortgage.
• Depreciating assets: In most situations, homes are appreciating assets, meaning they become more valuable over time. This characteristic justifies mortgage loans for real property. Conversely, RVs and boats are depreciating assets, meaning they become less valuable over time. Borrowing money to buy something that loses value may not provide long-term benefits.

The Bottom Line on Using a VA Refinance to Purchase a Boat or RV

No, you can not use your VA loan to purchase a boat or RV. But, you can use a VA cash-out refinance on your primary residence to indirectly finance your purchase. Just make sure you balance costs associated with a larger loan against the benefits of owning a boat or RV.