The Quick Read: A VA cash-out can reach up to 100% of your home’s appraised value, and the financed funding fee counts inside that ceiling. A conventional cash-out generally stops at 80% on a one-unit primary home. On the same house, that difference can add a meaningful share of home value in cash before closing costs, as long as conventional has any room left. Your real number still depends on your payoff, the appraisal, the fee, and what a lender will allow.
Key Takeaways
- The VA ceiling is 100% of appraised value. The conventional ceiling is usually 80% on a one-unit primary residence.
- Cash in hand is the ceiling, minus your payoff, minus the financed funding fee and closing costs.
- The gap is not fixed. It holds near 18 points of home value while conventional still has room, then narrows once conventional runs out.
- The gap matters most when you have modest equity. At high payoff balances, conventional can produce nothing while VA still does.
- VA has no mortgage insurance. A larger balance still means a larger payment and a thinner equity cushion.
- A ceiling is not a promise. Lender caps, credit, income, and appraisal can all pull the number down.
What Is a VA Cash-Out Refinance?
It is a new VA-backed loan that replaces your current first mortgage and puts the leftover money in your pocket. It is not a second loan. The new loan pays off every lien on the home. Whatever remains after the payoff and costs goes to you.
Lendmire’s VA cash-out refinance program page covers the basics. This article answers one narrow question: how much further does VA reach than a conventional cash-out?
Here is the mechanical difference. A conventional loan sold to the big secondary-market buyers has to leave you with a meaningful equity stake. A VA loan is partly guaranteed by the government. That guarantee protects the lender, so the program lets you borrow against nearly all of the home’s value.
Across the wholesale programs Lendmire places VA files with, there is also no VA loan limit when you have full entitlement. Entitlement is the amount of guaranty you have available. If you used some of it on an earlier VA loan, speak with a loan officer about what remains.
The Cash Formula in Four Lines
Both loan types use the same arithmetic. Only the ceiling changes.
1. Start with the appraised value of the home. 2. Multiply by the ceiling: 100% for VA, usually 80% for a conventional one-unit primary home. 3. Subtract your payoff, meaning the balance of the loan or loans being replaced. 4. Subtract the financed funding fee (VA only) and any closing costs you roll in.
What is left is your cash. If the number is zero or negative, there is no cash-out to take.
Notice what sits at the top. The appraisal sets the denominator. A Zestimate or a tax assessment does not. VA calls its figure “reasonable value,” and it appears on the Notice of Value after the VA appraisal.
Same Home, Two Loans
Percentages tell this story better than any single house. Say your home appraises at 100% of value and your payoff is 60% of that value. Here is how each route runs before closing costs.
| Step | Conventional | VA (first use) |
|---|---|---|
| Ceiling | 80% of value | 100% of value |
| Gross cash over payoff | 20% | 40% |
| Funding fee, financed | None | About 2.1% |
| Cash before closing costs | About 20% | Just under 38% |
The funding fee for a VA cash-out refinance is 2.15% on first use and 3.3% on later use, and it is waived for exempt veterans. It sits inside the 100% ceiling. So on later use, the same example nets roughly 37%. Those are rounded figures, and the fee applies to the loan amount rather than the home value, which is why the table shows about 2.1%.
In this example the VA route reaches roughly 18 more points of home value in cash. Closing costs come off both sides.
How the Gap Changes With Equity
The gap is not a fixed number. It moves with how much you still owe. Here are four payoff levels on a home valued at 100%, again before closing costs.
| Payoff | Conventional cash | VA cash (first use) |
|---|---|---|
| 50% of value | About 30% | About 48% |
| 60% of value | About 20% | About 38% |
| 70% of value | About 10% | About 28% |
| 85% of value | — | About 13% |
The last row matters most. If you owe 85% of the home’s value, an 80% ceiling leaves no room. VA still reaches the cash. The gap there is about 13 points, smaller than the 18 in the rows above, because conventional can no longer cover its side. That is the reason many borrowers with thin equity look at VA first.
The first row shows the opposite case. When you owe little, both loans produce a lot of cash. The gap still holds near 18 points of value, but it is a smaller share of what you receive. A large cushion makes the conventional route look less limited.
Why Do the Ceilings Differ?
The reason is how the loans are backed. Conventional cash-out loans follow secondary-market guidelines. Fannie Mae’s Eligibility Matrix lists 80% as the maximum for a one-unit primary home. It lists 75% for two to four units. Those are the limits for loans in that channel, and you should verify each cell against the live matrix.
VA works another way. Under VA Circular 26-19-05, VA no longer guarantees a refinance above 100% of value. The financed funding fee must fit inside that figure. The old 90% cap is gone from the program itself. Some lenders still apply a lower cap of their own, which is a lender choice and not a VA rule.
Conventional loans can also carry mortgage insurance on purchases with smaller down payments. On a cash-out above 80%, conventional simply is not available. So the comparison is partly about eligibility, not only price.
How a VA Cash-Out Is Underwritten, Step by Step
This is a full loan, not a streamlined one. Here is the sequence.
1. Eligibility. You need a Certificate of Eligibility (COE) from VA. The COE decides eligibility. Service rules are VA’s, not the lender’s.
2. Application and disclosure. You apply, and the lender gives you early disclosures. The loan must be a first lien.
3. Full file review. The lender looks at credit, income, and debt. Residual income is the controlling test. That means the money left each month after taxes, debts, and basic living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the standard table.
4. Credit. VA itself sets no minimum score. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher floor.
5. Appraisal and Notice of Value. The appraiser sets reasonable value. Each dollar of value is a dollar of ceiling. A low appraisal cuts your cash directly.
6. Classification and benefit test. VA’s system sorts the loan into Type I or Type II and checks for a net tangible benefit. More on that below.
7. Closing. The new loan pays off all liens. You receive what remains.
This is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Type I, Type II, and the Net Tangible Benefit
VA splits cash-out loans into two types. The split depends on whether the new loan, funding fee included, is larger than the payoff of the loan being replaced.
- Type I: the new loan does not exceed the payoff. You get little or no cash. This is closer to a rate or term change.
- Type II: the new loan is larger than the payoff. You take cash out.
Most borrowers reading this article are looking at Type II. VA also requires a net tangible benefit, a real, measurable gain for you. The Federal Register rule that created the benefit test sets the criteria. The rule exists to stop churning, where a borrower is moved into one refinance after another that mainly benefits the lender.
Type I loans that replace an existing VA loan also carry a fee recoupment test. The lender must certify that fees and costs will be recovered within a set period after closing, and the exact timing depends on the specific loan file and the lender.
Where the Rule Breaks: Edge Cases
The headline gap is the general rule. These situations change it.
- VA-to-VA seasoning. If you are refinancing an existing VA loan, you wait for seasoning. That is the later of 210 days after your first payment and your sixth payment. Converting a non-VA loan into VA has no VA seasoning clock, though a lender may add its own conditions.
- A lender cap below 100%. The program ceiling is not a guarantee. A lender can cap the loan lower, often tied to credit score or file strength.
- Low appraisals. For every point of value the appraisal comes in below your hope, VA loses a full point of ceiling. Conventional loses 80 cents. The VA advantage stays, but the absolute cash drops.
- Occupancy. VA cash-out is a primary-residence product. Conventional cash-out on a second home sits lower, at 75% on a one-unit.
- Property type. Manufactured homes cut the conventional ceiling sharply, and VA has its own property rules for them. Do not assume either answer without asking.
- No existing mortgage. A home you own free and clear is a known edge case. Ask before you assume a VA refinance can go forward.
- Prior VA use. Remaining entitlement and earlier use may affect the amount available and can change how the program applies to you.
What Shrinks the VA Advantage
Across the wholesale programs Lendmire places VA files with, the same few items shrink the gap again and again. The ceiling is the first number a borrower sees. The cash at closing is the last.
- The financed fee. It uses up a slice of the ceiling. The higher tier on later use takes a bigger slice.
- Closing costs. If you roll them into the loan, they also come out of your cash.
- The appraisal. A conservative value hits VA harder in points than it hits conventional.
- A bigger balance. Borrowing to the ceiling leaves no equity cushion. A small drop in home prices can put you at or above the home’s value.
- A bigger payment. More borrowed means more owed each month, even without mortgage insurance. Ask for a Loan Estimate and compare the payment on the extra amount before you commit.
The fee and closing costs are mechanical items shown on your Loan Estimate and Closing Disclosure. They are not prices to compare in an article.
VA vs. Conventional at a Glance
| Factor | VA cash-out | Conventional cash-out |
|---|---|---|
| Ceiling | 100% of value, fee included | Usually 80% (one-unit home) |
| Mortgage insurance | None | Not available above 80% |
| Occupancy | Primary residence | Primary, second home, investment |
| Loan limit | None with full entitlement | Agency conforming limits |
| Seasoning | Only if refinancing a VA loan | Its own rules |
When Conventional or Another Option Wins
VA is not always the better choice. Conventional can come out ahead in a few cases.
- You are not VA-eligible.
- You have a very low existing payment and only need a modest amount of cash. A smaller balance may suit you better.
- The home is a second home, where VA does not apply.
- You want to keep a thin balance for flexibility and the funding fee eats too much of the gain.
If you already have a VA loan and only want a lower payment, the IRRRL may fit better. That is the streamlined VA refinance. It needs no VA appraisal, carries a 0.5% fee unless you are exempt, and has the same seasoning and net tangible benefit tests. It gives you no cash out.
Some borrowers also compare a home equity line or loan against a cash-out refinance. A home equity product keeps your first mortgage in place. A cash-out replaces it. Your current first mortgage is often the deciding factor.
For a sense of scale, a federal CFPB study of cash-out refinances found that closing costs were among the most common uses of cash-out funds. Costs eat into the headline number for nearly everyone.
Key Terms Defined
Appraised value (reasonable value): the figure VA’s appraiser assigns to the home. It is the base for the 100% ceiling.
Entitlement: the portion of the loan VA guarantees. Full entitlement means no VA loan limit.
Funding fee: a one-time VA charge, waived for exempt veterans, that supports the program.
Net tangible benefit: a required, measurable gain for you from the refinance.
Seasoning: the waiting period before you can refinance a VA loan with another VA loan.
Residual income: the money left each month after taxes, debts, and basic living costs.
Frequently Asked Questions
Does VA really allow 100% of my home’s value?
Yes, on a cash-out up to 100% of the appraised value, including the financed funding fee. Some lenders set a lower cap, so ask what a specific lender allows before you plan around the full ceiling. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Will I walk away with 100% of my equity?
No. The funding fee and closing costs come out of the ceiling, and your payoff comes out first. What you receive is the remainder.
Can I use VA cash-out to leave a conventional loan?
Yes. A VA cash-out can refinance any loan type into VA. A conventional loan has no VA seasoning clock, though a lender may apply its own conditions.
Does the VA appraisal limit my cash?
It sets the base. If the appraisal comes in low, your ceiling falls dollar for dollar, so the cash falls too.
Is the VA cash-out a second mortgage?
No. It replaces your first mortgage. You keep one loan, with a new balance.
Check Your Own Number
Run the formula on your own file. Start with a realistic value for the home, take the ceiling, subtract your payoff, and subtract the financed fee and costs. Then ask what a lender would cap, and what the payment looks like on the bigger balance.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Lendmire is a mortgage broker and arranges these loans through wholesale lenders. All program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Eligibility Matrix
3. Federal Register, VA cash-out refinance rule (full text)
4. CFPB cash-out refinance research
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs · How to Check Entitlement and Get Your COE Before a VA Cash-Out · Does a Disability Rating Exempt You From the VA Cash-Out Fee?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.