The Quick Read: On a home appraised at $400K, a VA cash-out can reach 100% of that appraised value, with the financed funding fee counted inside that ceiling. The cash you actually receive is what remains after the old loan is paid off, the funding fee (unless you are exempt) and closing costs. Those deductions mean the cash is always smaller than the gap between value and balance. The appraisal and your payoff balance move the number more than anything else.
What “Clearing” Means at Full Value
Three different numbers get called “cash” in this conversation. Mixing them up is a common reason borrowers are surprised at closing.
- Gross equity: the appraised value minus what you owe.
- Cash available at the ceiling: equity after the funding fee is placed inside the 100% limit.
- Cash received: what is left after payoffs and closing costs. This is the number that lands in your account.
The title question lives in that third number. A $400K appraisal sets the ceiling at $400K, and everything else comes out of that figure.
The program lets you refinance any existing first mortgage into a new VA-backed loan. That includes FHA and conventional loans, so you do not need a current VA loan. Lendmire’s VA cash-out refinance program page covers the program overview. This article works the math.
A cash-out replaces your current mortgage with a larger one. It is not a second loan sitting on top, the way a HELOC would be.
Key Terms Defined
Appraised value (reasonable value): the number VA’s appraisal sets for your home. The 100% is measured against it, not your purchase price or an online estimate.
Funding fee: a one-time VA charge on the loan amount. It can be financed into the loan, and exempt borrowers pay none.
Payoff: everything that must be cleared at closing, including your current loan balance, any other liens and interest owed through the payoff date.
Net tangible benefit (NTB): a test the loan must pass showing the refinance is in your financial interest.
Entitlement: the VA benefit that backs your loan. Your Certificate of Eligibility (COE) shows what you have.
Residual income: the money left each month after your debts and living costs. VA treats it as the controlling test.
The Ceiling: 100% Including the Fee
The federal rule is plain. Under 38 CFR 36.4306, the new loan cannot exceed 100% of the reasonable value VA determines. The same section lets the funding fee be rolled into the loan. If the fee would push the total past 100%, that piece must be paid in cash at closing.
VA Circular 26-19-05 adds the measuring method. Loan-to-value is the total loan, funding fee included, divided by the appraiser’s value. VA no longer guarantees refinances above 100%.
Here is the catch for a $400K home. If you ask for the full ceiling and finance the fee, the fee takes up part of the 100%. You do not get $400K in loan plus a fee on top. The base loan is a bit smaller so that base plus fee equals the ceiling.
Is 100% a VA rule or a lender rule? The 100% is VA’s. Any lower cap is a lender’s choice. In our work, some lenders stop at a lower percentage. The wholesale programs we place VA cash-out files with reach the full 100% of appraised value, including the financed fee, subject to lender guidelines and full file review.
The $400K Walkthrough, Step by Step
Here is the sequence, using a $400K appraisal. These are simplified illustrations, not quotes. The percentages are of appraised value, and closing costs are left out because they vary by file.
1. Appraisal sets the ceiling. At $400K appraised, 100% is the ceiling.
2. Fee comes out of the ceiling. The cash-out fee is 2.15% for first use and 3.3% for subsequent use, charged on the loan amount. If financed, the fee sits inside the 100%. That works out to roughly 2% of value for a first-use borrower and just over 3% for subsequent use.
3. Payoff comes out next. Your old loan, other liens and accrued interest are cleared.
4. Closing costs come out. Whatever you choose to pay from proceeds reduces the cash further.
5. What remains is your cash. That is the real answer to “how much can it clear.”
If you are exempt from the fee because you receive VA compensation for a service-connected disability, step 2 disappears. The VA funding fee and closing costs page confirms the fee applies to refinances unless you are exempt, and that it is charged on the loan amount rather than the price.
Scenario Table: Cash Before Closing Costs
Here is how the same $400K appraisal plays out across three payoff levels. Figures are percentages of appraised value, rounded, before closing costs. This is illustrative arithmetic only.
| Payoff balance | First use (2.15%) | Subsequent use (3.3%) | Fee-exempt |
|---|---|---|---|
| 60% of value | about 38% | about 37% | 40% |
| 80% of value | about 18% | about 17% | 20% |
| 90% of value | about 8% | about 7% | 10% |
Closing costs come out of each of these cells. Your Loan Estimate shows them.
Look at the 90% row. A borrower with a high balance may see very little cash left at full value. The fee and costs can eat most of the margin. In that case, the stronger move may be a different loan type, or no refinance at all.
What Moves the Number
The appraisal. Every 1% the appraisal comes in below your hoped-for value cuts the ceiling by 1% of that value. Your payoff does not shrink to match. So the cash falls by the same amount. A low appraisal shrinks everything downstream.
Payoff composition. Second liens count. So does interest owed through the payoff date. Ask for a payoff statement with a per-day figure, not just the balance on your last statement.
Fee status. Exempt, first use and subsequent use give three different answers on the same house. Check your COE and your disability status before you estimate anything.
Closing costs. The lender sets these, not VA. VA also says the lender cannot charge a penalty for paying the loan off early. You can see costs and cash to close on your Loan Estimate and, later, your Closing Disclosure. Ask for the Loan Estimate early so the numbers are in front of you before you commit.
Lender caps. A lower cap shrinks the ceiling. At 90% instead of 100%, the cash drops by 10% of value before anything else comes out.
Does a Full-Value Loan Pass the Net Tangible Benefit Test?
Every VA cash-out has to show a net tangible benefit. The regulation defines it as the new loan being in the borrower’s financial interest, and the lender must give you the test. VA’s disclosure exhibit lists eight qualifying paths.
Here is where full value matters. One path is a new loan at or below 90% of reasonable value. At a full 100% loan, that path is closed to you. The file has to pass another way. Common ones:
- removing monthly mortgage insurance, which is typical when moving from an FHA or conventional loan;
- converting an adjustable loan to a fixed one;
- a shorter term;
- a lower payment;
- higher monthly residual income;
- refinancing an interim construction or repair loan.
This is where borrowers get caught. A loan can sit at 100% and fit VA’s ceiling, but still fail the benefit test. Ask your loan officer which path your file uses before you order an appraisal.
For a borrower moving out of an FHA or conventional loan, removing mortgage insurance is often the cleanest path. VA loans carry no monthly mortgage insurance of any kind.
Type I vs. Type II (and Why Only One Puts Cash in Your Hand)
Circular 26-19-05 splits VA refinances into two types. A Type I loan, funding fee included, does not exceed the payoff of the loan being refinanced. A Type II loan exceeds the payoff. Only Type II puts cash in your hands.
So if you see a loan labelled a cash-out but the new amount equals the payoff, you have a Type I file. You are changing terms, not pulling equity.
Where the General Rule Breaks
The 100% ceiling is a good guide. These cases bend it.
Seasoning on a VA-to-VA refinance. If you are refinancing an existing VA loan, the loan must be seasoned. The later of 210 days from the first payment and the sixth payment applies. Moving a non-VA loan into VA is a different path.
Reduced entitlement. A veteran who used entitlement before and has not fully restored it may face a different loan size. That is a separate question, covered in Lendmire’s piece Can a Veteran With Reduced Entitlement Do a VA Cash-Out at Full Value?. With full entitlement, there is no VA loan limit on the program. With reduced entitlement, speak with a loan officer about what applies to your file.
Occupancy. VA cash-out is for the home you currently own and live in. It is not a tool for homes you do not occupy.
Construction-to-permanent. Refinancing a construction loan falls under the cash-out rules, whether or not the principal changes.
Credit and income. VA sets no minimum credit score. The wholesale programs we place VA loans with start at a 580 decision score. Some lenders set a higher floor. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap, but a ratio above it needs residual income well above the table.
IRRRL vs. cash-out. The IRRRL (streamline) refinances an existing VA loan to a lower rate or from adjustable to fixed. It needs no VA appraisal and carries a 0.5% fee unless you are exempt. It does not put cash in your hands. If your goal is a lower payment on a current VA loan, the streamline may be the better fit. If your goal is cash, it is not an option.
Comparison Table: Where Each Option Fits
| Factor | VA cash-out | IRRRL (streamline) |
|---|---|---|
| Cash out | Yes | No |
| Current loan type | Any first mortgage | VA loan only |
| Maximum loan vs. value | 100% of appraised value | Not based on appraised value (no appraisal needed) |
| Funding fee | 2.15% first use, 3.3% after | 0.5% unless exempt |
| Fits | Needing cash or leaving FHA | Improving a VA loan |
Conventional and FHA cash-outs generally cap below VA’s 100%, which is why equity-rich veterans often look at VA first.
The Risks of Borrowing at Full Value
Taking the maximum is a choice, not a requirement. Here is why it deserves a second look.
Your equity cushion shrinks. At 100% of appraised value, you start with almost no equity. If prices dip, you can owe more than the home is worth. Selling later may then cost you cash at the table.
Your payment changes. The CFPB notes that a cash-out replaces your mortgage with a larger loan. That can extend your payoff time and raise your monthly payment, and the terms reset.
Unsecured debt becomes secured debt. A CFPB research report points out that using mortgage debt to pay off non-mortgage debt can put the home at risk if payments become unsustainable. Paying off credit cards with your house is a real tradeoff.
You do not have to borrow the full ceiling. Many borrowers take less than the max and keep a cushion. A smaller cash-out can also pass the 90% path, if you are staying under that line. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Your Loan Estimate Checklist
Before you commit, put these questions to your loan officer and find the answers in writing.
1. What does the appraisal say, and what is the ceiling at 100% of that value? 2. Which funding fee tier applies to me, and am I exempt? 3. What is the full payoff, including liens and per-day interest? 4. Which net tangible benefit path does my file use? 5. What are the total closing costs, and how much cash do I receive after them? 6. Does this lender cap below 100%? 7. How does my new monthly payment compare to my current one? 8. Do I need the full amount, or would a smaller cash-out serve me better?
Frequently Asked Questions
Can a VA cash-out really reach 100% of my home’s value?
Yes, VA allows a loan up to 100% of the appraised value, including the financed funding fee. Not every lender offers that. Some stop lower by their own policy. The wholesale programs Lendmire works with reach 100%, subject to lender guidelines and full file review.
Does the funding fee count toward the 100% limit?
Yes. If you finance the fee, it sits inside the ceiling. If the fee would push the loan above 100% of value, that portion is paid in cash at closing. Veterans who receive VA disability compensation are generally exempt from the fee.
Why is my cash smaller than my equity?
Equity is value minus balance. Cash is what remains after the funding fee, closing costs and any liens or accrued interest are paid. On a high-balance loan, those deductions can take much of the margin.
Do I need a current VA loan to do a VA cash-out?
No. A VA cash-out can pay off any first mortgage, including FHA or conventional. Moving to VA can also remove monthly mortgage insurance. If you do have a VA loan, the seasoning rule applies: the later of 210 days from the first payment and the sixth payment.
Do I have to take the full amount?
No. You can borrow less than the ceiling. A smaller loan keeps more equity in the home and can ease the payment increase. It may also open the 90%-of-value path on the benefit test.
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 VA loans through wholesale lenders. 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 with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
3. VA funding fee and closing costs
4. CFPB: Using your home equity guide
5. CFPB research: cash-out refinances and non-mortgage debt
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: VA vs Conventional Cash-Out Requirements for a Veteran · Can a Veteran With Reduced Entitlement Do a VA Cash-Out at Full Value? · How Much a VA Cash-Out Funding Fee Adds to Your Monthly Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.