The Quick Read: Usually on ceiling, but not always on the deal. A VA cash-out refinance can reach 100% of the home’s appraised value, including the financed funding fee. Conventional cash-out on a one-unit primary home stops at 80%. If your equity already fits under 80%, the VA’s extra headroom may not matter, and the funding fee can tilt the math the other way.
What Is the “Full-Value Cap”?
The full-value cap is the highest loan a VA cash-out can be, measured against the appraised value. For VA, that ceiling is 100%. The funding fee counts inside it.
Here is the formula in plain words. Take the total new loan, including any funding fee you finance. Divide it by the appraiser’s value. That ratio, called loan-to-value (LTV), cannot go above 100%. Federal rules at 38 CFR 36.4306 set the cap and say any part of the fee that would push you past it must be paid in cash at closing. VA Circular 26-19-05 confirms the fee is part of the LTV calculation.
Two things to keep straight. The cap is a ceiling, not a target. And it is not the same as getting 100% of your equity in cash, because the payoff of your current loan, the financed fee, and closing costs all come out of the new loan first.
How Does Conventional Cash-Out Compare?
Conventional is tighter. Fannie Mae’s Eligibility Matrix lists 80% maximum LTV for a cash-out on a one-unit primary residence. Two- to four-unit homes drop to 75%. Manufactured housing sits lower still, at 65%.
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Max LTV, one-unit home | 100% of appraised value | 80% |
| Monthly mortgage insurance | None | Not required at 80% or below |
| Upfront fee | Funding fee (unless exempt) | No funding fee |
| Who it favors | Cashing out past 80% | Modest cash, strong equity |
Last row matters most. The programs are not rivals on every file. They fit different borrowers.
Where Does High Equity Change the Answer?
High equity shrinks the VA advantage. Picture a homeowner who owes 40% of the home’s value and wants cash equal to another 15%. That borrower lands near 55% LTV. Conventional fits easily, with no mortgage insurance and no funding fee. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The VA cap earns its keep when you want to go beyond 80%. Say you owe 70% and need cash that takes you to 95%. Conventional cannot get there. Or say you would otherwise carry monthly private mortgage insurance, which the CFPB notes usually applies on refinances with less than 20% equity. VA has no monthly mortgage insurance at all.
Here is the catch. The VA cash-out funding fee is 2.15% on first use and 3.3% on later use. It does not drop with more equity, because cash-out has no down-payment tiers. A high-equity borrower who fits under conventional’s 80% cap is paying that fee for headroom they never use. Exempt veterans, such as those receiving compensation for a service-connected disability, skip it. That changes the comparison sharply.
For many veterans with moderate cash needs, the choice between VA and conventional cash-out is a genuine toss-up. Exempt status leans toward VA. A non-exempt borrower staying under 80% often leans conventional.
How Does a VA Cash-Out Work, Step by Step?
Across the wholesale programs Lendmire places VA files with, the sequence looks like this:
1. Eligibility. You need a valid certificate of eligibility (COE) from VA.
2. Full underwriting. Unlike the streamlined IRRRL, a cash-out requires an appraisal, a credit check, and full income review. Residual income, the money left after major bills, is the controlling test. The common 41% debt-to-income figure is a guideline, not a cap.
3. Appraisal sets the ceiling. The 100% applies to the appraised value, so a lower appraisal shrinks your cash.
4. Payoff comes first. The new loan must pay off your existing first mortgage and any other liens. Anything left after that, the financed fee, and costs is yours.
5. Net tangible benefit. The lender must show the refinance helps you. Options in the federal rule include a lower payment, a shorter term, removing monthly mortgage insurance, or moving from an adjustable to a fixed rate.
6. Occupancy. You must live in the home.
The wholesale programs we use start at a 580 decision score. VA itself sets no minimum score, and some lenders set a higher floor. Seasoning applies too: the later of 210 days from your first payment and your sixth payment. Everything here is subject to lender guidelines and full file review.
You can also use a VA cash-out to move a non-VA loan, such as a conventional or FHA mortgage, into the VA program. VA states this directly. You do not need a VA loan to start.
For the broader program picture, see Lendmire’s VA cash-out refinance program page.
Why Do Some Lenders Stop Below 100%?
Because the VA sets the ceiling, not the lender. Many lenders add their own limits, sometimes tied to credit score. You will see 90% quoted often. That number is real, but it comes from two places: a net tangible benefit option in the federal rule (a loan at 90% LTV or less satisfies that test) and lender overlays. It is not the VA cap.
The programs we place VA cash-out files with do reach 100% of the appraised value, including the financed fee. Even so, whether you reach it still depends on credit, residual income, and the appraisal. Ask any lender for its actual maximum before you assume the headline number.
What Does Maxing Out the Cap Cost You?
Borrowing near 100% leaves almost no cushion. If values dip, you could owe more than the home is worth, and selling would mean bringing cash to the table. Fewer refinance options follow, too.
The CFPB’s home equity guide adds the budget side. A cash-out replaces your mortgage with a larger loan. Your payment may rise, payoff may take longer, and cash-out loans are usually repaid over 30 years. Its guide also says no equity option turns 100% of your equity into cash.
Closing costs are real as well. VA’s cash-out page warns they can add up to thousands of dollars. Whether the costs come out of the loan or your pocket, they reduce what you walk away with.
A tempering thought: more leverage is not automatically a better deal. The cheaper path is often the one that borrows less.
When Does Each Loan Win?
VA tends to win when:
- You want cash that pushes you past 80% LTV.
- You are exempt from the funding fee.
- Conventional would require monthly mortgage insurance.
- Your credit sits below what conventional programs prefer.
- You want to move an existing non-VA loan into the VA program. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Conventional tends to win when:
- Your total new loan stays comfortably under 80%.
- You are not fee-exempt, so the funding fee is pure cost.
- You plan to sell soon and want to avoid a heavy balance.
- You lack VA eligibility.
Conventional also carries its own rule: Fannie Mae’s Selling Guide requires the existing first mortgage to be at least 12 months old for a cash-out. Check that against your timeline.
If you are refinancing a rental or second home, occupancy decides the leverage, and VA needs you to live there. That is the whole answer for non-primary homes.
Key Terms Defined
Full-value cap: The VA’s ceiling of 100% of appraised value, with the financed funding fee counted inside it.
Loan-to-value (LTV): The new loan divided by the appraised value.
Funding fee: A one-time VA charge that replaces monthly mortgage insurance. It can be financed or paid in cash, and some veterans are exempt.
Residual income: The money left each month after your major obligations, which VA uses as the controlling test.
Net tangible benefit: A concrete improvement the refinance must deliver, such as a lower payment or shorter term.
Seasoning: The waiting period before you can refinance a recent loan.
A Quick Decision Checklist
Ask yourself:
1. Do I need cash that takes my LTV above 80%?
2. Am I exempt from the funding fee?
3. Would conventional require monthly mortgage insurance on my file?
4. Can I live with a thin equity cushion?
5. Does the new payment still leave healthy residual income?
Mostly yes answers point to VA. Mostly no answers point to conventional or a smaller cash-out. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Is VA cash-out really capped at 90%?
No. The federal cap is 100% of reasonable value. The 90% figure comes from a net tangible benefit option and from lender overlays, so it appears often in lender content. What you can actually borrow depends on the lender and your file.
Does the funding fee count toward the cap?
Yes. You can finance the fee, but the total loan, fee included, cannot exceed 100% of the appraised value. Any portion that would push you over must be paid in cash at closing.
Do I need an existing VA loan to do a VA cash-out?
No. A VA cash-out can refinance a conventional, FHA, or other loan into the VA program. The IRRRL, by contrast, only refinances an existing VA loan.
If I have lots of equity, should I skip VA?
Not automatically. If your new loan fits under 80% and you owe the funding fee, conventional often costs less in fees. If you are fee-exempt or need to exceed 80%, VA may still come out ahead.
Can I take out 100% of my equity?
No. The payoff, financed fee, and closing costs come out of the loan first. A lower appraisal also shrinks the available cash.
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.
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.
For the program’s current guidelines, see VA loan programs.
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References
3. Fannie Mae Eligibility Matrix
4. CFPB
5. VA.gov, Cash-out refinance loan
6. CFPB, Using home equity to meet financial needs
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 More Cash a VA Cash-Out Reaches Than Conventional · Can a Veteran Get a VA Cash-Out Refinance for the Full Home Value? · Can a Veteran With Reduced Entitlement Do a VA Cash-Out at Full Value?
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.