The Quick Read: On the same appraised value, a VA cash-out lets you borrow up to 100% of value, while FHA and conventional cash-outs stop at 80%. That 20-point gap is the most extra gross cash VA can add. It is a ceiling, not a typical result, because your payoff, the VA funding fee, closing costs and the appraisal all take a bite. It also applies only to eligible Veterans, service members and surviving spouses.
Who Can Use a VA Cash-Out?
Only eligible Veterans, service members and surviving spouses can use a VA cash-out. If that is not you, the VA numbers below are background, not an option. FHA and conventional cash-outs stay open to any qualified homeowner.
Occupancy matters too. These are loans for the home you live in.
One point trips up many people. A VA cash-out can pay off a loan that is not a VA loan. That means your current FHA or conventional mortgage can be replaced by a VA loan, with cash back if you choose.
How Is the Extra Cash Calculated?
Extra cash comes from a higher ceiling, minus everything the new loan has to cover first. Three steps do the work. Multiply value by the program’s ceiling. Subtract the payoff of every lien you are retiring. Then subtract the fees and closing costs that come out of the proceeds.
Written as a formula:
Net cash = new loan − payoff of all liens − funding fee (if not paid separately) − closing costs.
Value sets the ceiling. VA’s cash-out refinance circular says to divide the total loan amount, including any financed funding fee, by the property’s value. VA won’t guarantee a refinance above 100%. A financed fee cannot push the loan past reasonable value.
FHA works differently. Across the wholesale programs Lendmire places FHA files with, the FHA cash-out reaches 80% of value on a home you have owned and occupied for 12 months before the case number. Lendmire’s FHA cash-out refinance program page covers that path in more detail.
Do the subtraction in your head. At a 100% ceiling you can borrow the full value on paper. At 80%, you must leave 20% of value untouched. Everything else is arithmetic.
One Home, Three Programs
Run the same home through all three and the gap is easy to see. The table uses modeled assumptions, not market data. It assumes the appraisal equals your estimate and shows gross cash before fees and closing costs.
| Program | Cash-out ceiling (of value) | Insurance or fee on the loan |
|---|---|---|
| VA | 100% | One-time funding fee; no monthly insurance |
| FHA | 80% | 1.75% upfront premium plus annual premium |
| Conventional (1 unit, primary home) | 80% | No FHA-style premium |
Those conventional figures come from Fannie Mae’s eligibility matrix. It lists 80% for a one-unit principal residence and 75% for two to four units. HUD cut the FHA ceiling to 80% in a Mortgagee Letter. The old 85% figure still floats around online. It is out of date.
Now vary the payoff, expressed as a share of home value:
| Your payoff (% of value) | VA gross cash | FHA or conventional gross cash | VA adds |
|---|---|---|---|
| 40% | 60% of value | 40% of value | 20 points |
| 60% | 40% of value | 20% of value | 20 points |
| 75% | 25% of value | 5% of value | 20 points |
| 85% | 15% of value | — | 15 points |
| 95% | 5% of value | — | 5 points |
Look at the pattern. The gap holds at 20 points while your payoff sits under 80% of value. Past that, FHA and conventional have no room left, so VA’s advantage shrinks as your payoff climbs. At a 95% payoff, VA still adds a sliver, and that sliver is mostly eaten by fees.
This is also where VA looks best on paper. Homeowners with heavy equity and a small balance gain the most in raw cash. But heavy equity is also the group that least needs the higher ceiling.
What Shrinks the Extra Cash?
Five things decide how much of that 20 points you actually keep. Most borrowers feel at least three of them.
Appraised value. Value sets the ceiling, so a low appraisal cuts your cash dollar for dollar. VA uses its own appraisal and its own idea of reasonable value, not your estimate. FHA also uses an “Adjusted Value,” which can differ from the appraisal on a recently acquired home.
Your payoff, including second liens. Every lien you retire comes off the top. On FHA, the 80% cap applies to the first and second liens combined. A second lien adds no room.
The funding fee. VA’s funding fee page describes it as a one-time payment on a VA-backed loan. It applies to a VA refinance unless you meet an exemption. One exemption is receiving VA compensation for a service-connected disability. Other exemptions cover certain surviving spouses and Purple Heart recipients. Fee levels depend on whether this is your first use of the benefit or a later one, so check VA’s current chart before you plan around a number.
Here is the catch. If you finance the fee, it sits inside the 100% ceiling. It trims your cash instead of adding to it.
Closing costs. Whether you pay them out of pocket or roll them in, they reduce what lands in your hands or raise your balance.
Lender caps. A program maximum is a ceiling, not a promise. Many lenders set their own limits below it. Lender overlays are a real gap between “VA allows” and “this lender offers.”
How a VA Cash-Out Is Underwritten, Step by Step
A VA cash-out is a full loan, not a streamline. Here is the sequence.
1. Pick the type. VA splits cash-out refinances into Type I and Type II. In Type I, the new loan, fee included, does not exceed the payoff. In Type II, it does. Only Type II puts cash in your hands.
2. Full appraisal and full underwriting. The streamline version (IRRRL) skips most of that, and it gives no cash. A true cash-out checks your credit, income and the home’s value from scratch.
3. Value sets the ceiling. The lender divides the total loan, fee included, by the VA value.
4. Net cash is computed. The formula from earlier applies: new loan minus payoffs, fee and costs.
5. Benefit test. When you move from a non-VA loan to VA, VA’s quick-reference guide calls for at least one net tangible benefit to you.
6. Disclosures. Lenders owe Veterans a set of cash-out disclosures at application and again at closing.
Credit and income get a full review. VA looks at residual income and debt-to-income, and the lender may add its own standards. Every program detail stays subject to lender guidelines and a full file review. Nothing here is a commitment to lend.
Coming From an FHA Loan: What Changes Beyond the Cash
The cash is only half the story. The other half is monthly insurance. Picture a homeowner on an FHA loan who bought with 3.5% down. FHA charges an upfront premium of 1.75% of the base loan, financed into the balance. It also charges an annual premium that depends on term, loan amount and LTV. On a thirty-year loan above 90% LTV, that annual premium lasts for the term. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
VA has no monthly mortgage insurance. So refinancing from FHA to VA can remove the annual premium entirely, even for a borrower who takes little or no cash. That can matter more than the extra equity. For the long-run cost of the FHA side, Lendmire has a piece How Much the Annual MIP Adds to an FHA Cash-Out Payment Over Time.
Now a different picture. Say you hold a conventional loan with a modest balance and plenty of equity. Both loans stop at 80%, so VA’s extra room shows up as extra cash, not as an insurance change. The decision is about whether you need that cash, and whether a larger balance is worth it.
A practitioner’s observation: borrowers often focus on the maximum and miss the payment side. A bigger balance raises the monthly payment. A financed funding fee enlarges that balance. Meanwhile, dropping FHA monthly insurance pulls the other way. Weigh them together, using the Loan Estimate you receive, not a headline ceiling.
One more question comes up constantly. Can an FHA or conventional borrower get cash back through VA? Yes. A VA cash-out can pay off a non-VA loan, and a Type II loan delivers cash. Some web pages read as if only a conversion is possible. They are describing Type I.
Where the General Rule Breaks
The 20-point rule has exceptions. Know the ones below before you plan around it.
Conventional “limited cash-out” is not cash-out. Fannie Mae’s Selling Guide allows higher leverage on a limited cash-out refinance. But it covers only your payoff, costs and a small amount of cash back. The cash-back cap changes over time, so check the guide before relying on any figure.
FHA seasoning. The FHA cash-out needs 12 months of ownership and occupancy before the case number. A home you bought recently may not qualify yet, whatever the equity looks like.
County limits can bind first. County loan limits apply to FHA and change every year. On a high-value home, the limit can cap the loan before the 80% ceiling does. No amount of equity changes that.
State law can override program caps. Texas is the clearest example. Its homestead rules cap equity borrowing at 80%. A VA program that allows 100% still has to respect state law where it applies.
The IRRRL can’t do this job. It refinances an existing VA loan only. It cannot pay off an FHA loan and it gives no cash.
VA-to-VA has extra tests. Seasoning, fee recoupment and rate-reduction tests apply when you refinance a VA loan into another VA loan. Those do not apply to a non-VA-to-VA refinance.
Exempt borrowers. If you are exempt from the funding fee, more of the 100% reaches you as cash. Your status can change the answer more than the loan type does.
What You Give Up
A 100% loan leaves almost no cushion. If values slip, you can owe more than the home is worth. Any real-estate dip then lands on you alone. That is a long way from the 20% buffer FHA and conventional force you to keep.
Your old loan also goes away. A cash-out replaces the original mortgage, which separates it from a home equity loan or HELOC. Those leave your first mortgage intact. Replacing the loan means replacing its interest rate, term and balance too.
The CFPB warns that turning other debts into mortgage debt secured by your home can put the home at risk of foreclosure. That matters because paying off other debts is a common reason people take cash out. Moving credit card balances into a mortgage lowers the monthly bill, but the debt now sits on your house.
Is It Worth Chasing the Extra Cash?
It depends on what the cash does for you. Use this short checklist.
- Do you qualify for the VA benefit, and have you checked your funding fee status?
- Is your payoff well under 80% of value, so the 20 points actually shows up?
- Do you need the cash, or are you reaching for the maximum because it is there?
- Does dropping FHA monthly insurance matter more than the cash?
- Can you live with a thin equity cushion?
- Will the new balance and payment fit your budget with room to spare?
If most answers are yes, a VA cash-out deserves a serious look. If you answered no to the first, FHA or conventional is your path, and the 80% ceiling is still plenty for many goals. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Key Terms Defined
Loan-to-value (LTV): the loan balance divided by the home’s value. A higher LTV means you borrow more against the home.
Cash-out refinance: a new, larger mortgage that pays off your old one and gives you the difference in cash.
Funding fee: a one-time VA charge on a VA-backed loan that can be financed into the balance.
Type I and Type II: VA’s two cash-out categories. Type II is the one that puts cash in your hands.
Annual MIP: FHA’s monthly mortgage insurance premium, charged each year as a share of the balance.
IRRRL: VA’s streamline refinance for an existing VA loan. It gives no cash.
Seasoning: the time you must own and occupy a home before refinancing it.
Frequently Asked Questions
Does a VA cash-out really let me borrow 100% of my home’s value?
Up to 100% of VA’s reasonable value, yes, including any financed funding fee. But many lenders set a lower limit of their own. The program maximum is not the same as what a given lender will offer you.
Can I use a VA cash-out to replace my FHA loan?
Yes, if you are eligible for the VA benefit. A VA cash-out can pay off a non-VA loan, and it can remove FHA monthly insurance. A VA streamline cannot do this, because that product only refinances an existing VA loan.
Do I keep all of my equity as cash at 100%?
No. The 100% includes the funding fee and rests on VA’s value, not your estimate. Your payoff, closing costs and the fee all come out of the proceeds first. What reaches you is the leftover.
How much of the 20-point gap shows up in real life?
Less than the headline. It holds in full only when your payoff sits well under 80% of value, and fees trim it from there. At high payoffs, FHA and conventional offer nothing and VA’s edge narrows fast.
Is an FHA cash-out still worth considering?
Yes, if you are not VA-eligible or you want to keep an equity cushion. It reaches 80% of value on a home you have owned and occupied for 12 months. Eligibility, payment history and county loan limits all matter, and everything is subject to lender guidelines.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA Circular 26-19-05: Cash-Out Refinance Rule
2. Fannie Mae Eligibility Matrix
3. HUD Mortgagee Letter on FHA Cash-Out Limits
4. VA: Funding Fee and Closing Costs
5. VA Cash-Out Refinance Quick Reference
7. CFPB: Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much the Annual MIP Adds to an FHA Cash-Out Payment Over Time · Is an FHA Cash-Out Easier to Qualify for Than a Conventional Cash-Out? · Can You Refinance Out of FHA With a Conventional Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.