The Quick Read: The VA cash-out refinance can reach 100% of your home’s appraised value, and the VA funding fee counts inside that ceiling. Any part of the fee that would push the loan past 100% has to be paid in cash. The VA sets the ceiling, but each lender decides whether to use all of it. Reaching full value also depends on your credit, your residual income, and living in the home.
Here is how the ceiling works, how the loan is underwritten, and where the rule bends.
VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the full-value VA cap with the first-use funding fee financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. The HELOC line is the line program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages.
What “Full Value” Means Under VA Rules
Full value means the new loan, funding fee included, can equal 100% of the home’s reasonable value as VA sets it. That is the program’s outer limit, not a promise. Federal regulation, 38 CFR 36.4306, caps the loan at 100% of reasonable value. The VA Lenders Handbook, Chapter 6 says the same.
Two things sit under that ceiling. One is the amount you owe on the current loan. The other is whatever cash you take out.
Here is the part that trips people up. The ceiling is the VA’s rule. Some lenders set a lower cap of their own, and a few will not go to 100% at all. Across the wholesale programs Lendmire places VA files with, the full 100% is available, but each file is still reviewed on its own. Qualifying at VA does not mean every lender will lend that much.
If you are refinancing a home you live in, the VA cash-out allows up to 100% of the appraised value, with the financed fee counted inside that figure. Lendmire’s page on the VA cash-out refinance program covers the basics.
How the Loan Is Underwritten, Step by Step
A VA cash-out refinance is a full loan, not a streamline. The steps run in a set order.
1. Certificate of Eligibility (COE). VA decides eligibility. You can get the COE through a lender, on VA.gov, or by mail. Service requirements are VA’s rules, not the lender’s.
2. Credit and income review. VA requires satisfactory credit and enough income for the monthly obligations. Across the wholesale programs we use, the decision-score floor is 580. VA itself sets no minimum score.
3. Residual income. This is the controlling test. It measures what is left each month after the mortgage, debts, taxes, and living costs. The 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it needs residual income well above the VA table.
4. Loan type. The file is classified as Type I or Type II (more on that below).
5. Disclosures. VA Circular 26-19-05 requires cash-out disclosures to reach you within 3 business days of the initial application and again at closing.
6. Net tangible benefit. The loan must actually help you in at least one listed way.
7. VA appraisal. The appraiser’s reasonable value, reported on the Notice of Value, becomes the ceiling.
8. Closing. The loan is settled, and the old loan is paid off.
Because this is a consumer mortgage, you receive a Loan Estimate and a Closing Disclosure along the way. Read both against each other.
An IRRRL, the VA streamline refinance, is different. It generally needs no appraisal and no credit underwriting. A cash-out loan needs all of it.
How the Appraisal Sets Your Number
The appraisal is the single figure that caps the whole loan. VA orders it through the lender, and you do not pick the appraiser. The result is the Notice of Value, which states the reasonable value.
Everything else follows from that number. If the home appraises at the value you expected, the ceiling is where you planned. If it comes in lower, the ceiling drops with it, and so does the cash.
A low appraisal does not end the file, but your options are limited. You can ask your lender whether a reconsideration of value is available and whether you have comparable sales the appraiser missed. You can take less cash. Or you can wait. Plan on the lower number being the working one.
The Funding Fee Sits Inside the Ceiling
The old habit was to add the funding fee on top of 100%. That is no longer how it works. Under the current rule, the fee can be financed, but any portion that would push the loan above 100% of reasonable value must be paid in cash at closing.
The fee depends on your use of the benefit. For a cash-out refinance, it is 2.15% for first use and 3.3% for subsequent use. Veterans who receive compensation for a service-connected disability, and certain other exempt groups, do not pay it. VA’s funding fee and closing costs page has the current exemption details.
The practical effect is simple. Every dollar of fee or closing cost you finance reduces the cash you receive, because the ceiling is fixed. Net cash is the new loan, minus the payoff of your current loan, minus other liens, the funding fee, and closing costs.
Take a home at full value with a modest existing balance. You might take the maximum loan, but the fee and costs come out of that amount first. What lands in your account is smaller than the equity number suggests. Run that arithmetic before you plan what the cash is for.
Type I vs. Type II
The two types differ in one thing: whether you take cash.
| Factor | Type I | Type II |
|---|---|---|
| New loan vs. payoff | At or below payoff | Above payoff |
| Cash to borrower | None | Yes |
| Net tangible benefit | Required | Required |
| Extra checks | Seasoning, recoupment (VA-to-VA) | Seasoning |
Per VA Circular 26-19-05, Type I means the new loan, funding fee included, does not exceed the payoff of the loan being refinanced. Type II means the loan exceeds the payoff, so you take cash.
A Type II loan does not have to lower your payment. The handbook notes it can carry any negotiated terms with no required payment reduction. Your monthly payment can go up. Expect that if you pull out meaningful equity.
Other Requirements That Gate Full Value
Reaching the ceiling takes more than equity.
Occupancy. VA cash-out is for the home you live in. It is not for a rental or a second home. If you are on active duty and cannot occupy the home, VA lets a spouse count as the occupant. Occupancy decides the leverage.
Seasoning. If you are refinancing an existing VA loan, you must wait. Across the wholesale programs, seasoning is the later of 210 days from the first payment and the sixth payment. The cash-out carries the same seasoning as the streamline.
Net tangible benefit. The lender must give you a test, and the loan must pass at least one listed criterion. Examples include removing monthly mortgage insurance, shortening the term, lowering the payment, or increasing monthly residual income. A loan at or below 90% of reasonable value also passes. Refinancing an interim construction or repair loan counts too, as does moving from an adjustable rate to a fixed one.
Credit and income. The wholesale floor is a 580 decision score. Some lenders set a higher floor. A score at the floor and a ratio above guideline will draw a harder look.
Where the General Rule Breaks
Some situations change the answer.
You have a non-VA loan. A conventional or FHA loan can be refinanced into a VA loan through the cash-out program. You do not need an existing VA loan. A Type I conversion from non-VA still needs at least one net tangible benefit.
Construction-to-permanent. VA’s purchase and cash-out page says these conversions fall under the cash-out program.
Prepayment penalties. A refinancing loan may include penalties owed on the old loan. Check your current note.
State law. Some state laws may limit cash-out leverage below 100%. Ask whether your state has such a rule before you plan around the full amount.
Entitlement. With full entitlement, there is no VA loan limit, and the wholesale programs we use serve amounts up to $4,000,000. With remaining entitlement, a down payment may be required. Speak with a loan officer about your own entitlement rather than relying on a general figure.
Energy improvements. The handbook allows up to $6,000 of energy-efficiency improvements, but the improvements and the fee together still cannot push the loan past 100%.
Rule vs. Lender Policy
When you shop, separate what VA allows from what a lender chooses.
| Question | VA rule | Lender choice |
|---|---|---|
| Maximum loan | 100% of reasonable value | May set a lower cap |
| Minimum credit score | None set | Sets a floor |
| Fee financed? | Yes, inside the cap | Follows VA |
| Residual income | VA table | May add overlays |
Ask each lender two questions. What is your highest loan-to-value on a VA cash-out? And what credit floor applies at that level?
What the Decision Looks Like in Practice
Picture a veteran with a home that appraises well above the balance. Full value is on the table. The question is whether to use it.
Borrowing 100% leaves no equity cushion. If prices dip and you sell, you could owe more than the sale brings. A later refinance gets harder too, because you have nothing to build on. And your payment may rise, since a cash-out loan carries no payment test.
Many veterans borrow less than the ceiling. They take what a specific project needs and keep a buffer. Others take the whole amount to retire higher-cost debt. Either choice can be sound. The point is to choose it on purpose, not because the ceiling allows it.
A quick checklist before you apply:
- Confirm your COE.
- Confirm you will occupy the home.
- Check how many payments have passed, if the current loan is VA.
- Estimate your net cash after the fee and closing costs.
- Ask whether the lender caps leverage below 100%.
- Weigh the larger payment against what the cash will do for you.
Key Terms Defined
Reasonable value: The home’s value as VA’s appraisal sets it. The ceiling comes from it.
Notice of Value: The VA document that reports the appraised reasonable value.
Loan-to-value (LTV): The loan amount, funding fee included, divided by reasonable value.
Net tangible benefit: A test showing the refinance helps you in at least one listed way.
Seasoning: The waiting period after your last loan before you can refinance it.
Residual income: What remains each month after your mortgage, debts, taxes, and living costs.
Certificate of Eligibility (COE): The VA document confirming you qualify for the benefit.
Frequently Asked Questions
Can I really borrow 100% of my home’s value with a VA cash-out refinance?
VA allows it, and the wholesale programs Lendmire works with reach 100% of the appraised value including the financed fee. Each file is still reviewed on credit, residual income, and the appraisal. Some lenders cap leverage lower, so ask before you apply. Nothing here is a commitment to lend.
Does the funding fee count toward the 100% limit?
Yes. The fee can be financed, but it sits inside the ceiling. Any portion that would push the loan above 100% of reasonable value is paid in cash at closing. Veterans who are exempt do not pay the fee.
Can I use a VA cash-out refinance on a rental or second home?
No. The home must be one you occupy, and occupancy decides the leverage.
What if the appraisal comes in lower than I expected?
The ceiling drops with it, because the appraisal sets reasonable value. Ask your lender about a reconsideration of value and whether comparable sales support a higher number. Otherwise you can take less cash or wait.
Do I need a VA loan now to refinance into one?
No. A conventional or FHA loan can be refinanced into VA through the cash-out program. A Type I conversion still needs a net tangible benefit.
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’s piece Can You Take Full Home Value Through a VA Cash-Out Refinance? goes deeper on that ceiling.
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.
For the program’s current guidelines, see VA loan programs.
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References
2. VA Lenders Handbook, Chapter 6
This article is part of Lendmire’s VA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: VA Cash-Out Refinance Eligibility and LTV Limits for Veterans · Is a VA Cash-Out Refinance Type II Worth It Over Type I? · Can You Qualify for a VA Cash-Out Refinance at Full Value?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.