The Quick Read: Usually VA, if you have full eligibility and the home is your primary residence. A VA cash-out reaches further into your equity and carries no monthly mortgage insurance. FHA is the fallback when VA eligibility, VA’s net tangible benefit test, or a lender’s credit and income review does not work out. Four things decide it: how much equity you want to keep, what the one-time VA fee costs against FHA’s ongoing insurance, whether you pass the benefit test, and whether you want to use VA entitlement.
What Are You Actually Choosing Between?
Both loans replace your current mortgage with a bigger one and hand you the difference in cash. Both are government-backed, which is why lenders will make them to borrowers with thinner credit than a conventional loan wants. Beyond that, they are built differently.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium 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.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
An FHA cash-out refinance is insured by the Federal Housing Administration. The Lendmire FHA cash-out refinance program page lays out the basics. It is for owner-occupied primary residences. You need to have owned and lived in the home for 12 months before the case number is assigned. The maximum loan is 80% of the home’s value. Mortgage insurance applies.
A VA cash-out is guaranteed by the Department of Veterans Affairs. It is open to eligible veterans, service members and certain surviving spouses, and it needs a Certificate of Eligibility. It can take you well past 80% of value. Instead of monthly mortgage insurance, it charges a one-time funding fee.
Here is a detail that trips people up. VA calls its refinance a “cash-out” even if you take no cash. Under VA Circular 26-19-05, VA sorts these loans into two types. Type I means the new loan, fee included, does not exceed the payoff. Type II means it does. The circular also says a VA cash-out can refinance a non-VA loan, such as an FHA loan, into a VA loan. That matters if you already carry FHA insurance.
How Do They Compare Side by Side?
The table below shows the structural differences. Program figures for FHA reflect the wholesale programs Lendmire places files with. Lender guidelines and full file review decide any actual loan.
| Factor | FHA cash-out | VA cash-out |
|---|---|---|
| Who can use it | Owner-occupants who pass the 12-month rule, credit and income review | Eligible veterans and others, with a Certificate of Eligibility |
| Max financing | 80% of value | Up to full reasonable value, fee included |
| Mortgage cost | Upfront 1.75% plus annual premium | One-time funding fee, no monthly insurance |
| Occupancy | Primary residence only | Primary residence |
| Appraisal | Required | VA appraisal sets value |
| Entitlement | Not touched | Used or reused |
Two rows carry most of the weight: max financing and mortgage cost. Everything else is either a gate you must pass or a side effect.
Which One Lets You Take More Equity?
VA does, and by a wide margin. FHA stops at 80% of the home’s value. That leaves you at least 20% equity on day one. HUD set that cap in Mortgagee Letter 2019-11, which cut it from an earlier, higher limit to reduce risk to the FHA insurance fund.
VA’s own circular says it will not guarantee a refinance when the loan exceeds the property’s reasonable value, so VA tops out at 100% of value. Any financed funding fee counts toward that ceiling. If the base loan plus the fee would push past value, the loan does not work as structured.
More room is not the same as a good idea. Picture a home worth 100 units with 50 owed. Under FHA you can borrow up to 80, so you could pull out up to 30 before costs. Under VA’s ceiling you could, in theory, borrow up to 100. That would leave no cushion at all. A dip in prices would put you underwater.
Also, the program ceiling is not what a lender will approve. Some lenders set their own lower limits for VA cash-outs and add credit minimums of their own. VA does not set a minimum score, so that decision rests with each lender. Ask your lender where its own line sits before you plan around the maximum.
Does Mortgage Insurance or the Funding Fee Cost More?
It depends on how long you keep the loan. The two charges work differently, and this is where many veterans guess wrong.
FHA charges an upfront premium of 1.75% of the base loan, usually financed into the balance. It also charges an annual premium, collected monthly. Across the wholesale programs Lendmire works with, that annual premium ranges from 0.15% to 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan at or below 90% LTV, it ends after eleven years. Above 90%, it lasts the full term. A cash-out at the 80% cap falls in the first group. HUD has trimmed the annual premium since the original limit change, but the structure is the same.
VA charges no monthly mortgage insurance. It charges a one-time funding fee, which VA News lists as higher after first use than on first use. Putting money down does not reduce it. You can roll it into the loan, which raises the balance and the interest you pay on it. Allowable fees can be paid from your cash proceeds. Only the funding fee and certain energy-efficiency costs can be added to the loan amount.
Then there is the exemption. Veterans receiving service-connected disability compensation are exempt from the funding fee, as are eligible surviving spouses. For an exempt veteran, the fee side of the math is zero. That can swing the comparison hard toward VA. Check your own status with VA, because the rules turn on your specific rating and situation.
Here is the break-even logic in plain words. FHA’s cost is spread over years of monthly premiums. VA’s cost is front-loaded into one fee. If you expect to sell or refinance again within a few years, the fee is a heavier hit. If you plan to hold the loan past the point where eleven years of premiums would have added up, VA tends to cost less. An exempt veteran does not have to do this math at all.
Doesn’t a Cash-Out Lower the Payment?
Usually not. VA’s own consumer guidance, in a VA News warning about refinance pitches, says a cash-out rarely lowers the monthly payment. It adds the cash to the loan amount, which increases the interest you pay over the life of the loan. Be careful of any lender that claims otherwise.
The same guidance says VA does not partner with any single lender to offer special refinance options. A mailer promising cash in hand, skipped payments and no costs is a marketing pitch, not a VA program. Any “no-cost” refinance still has costs. They are built into the balance or the interest, not erased.
Borrowing more does not guarantee a lower payment, either. A larger balance can leave the payment flat or higher, even when other terms look better. Compare the new balance, the term and the total cost, not just one number.
When Does FHA Cash-Out Actually Win?
FHA wins in a few real situations. This is the section most comparison pages skip.
You do not have usable VA eligibility. If you lack a Certificate of Eligibility, or your service does not qualify, the question answers itself.
You want to protect your entitlement. A VA cash-out uses or reuses entitlement and can trigger the higher subsequent-use fee. FHA does not touch entitlement. If you plan another VA purchase, such as a move with a new primary residence, that tradeoff is real. Lendmire’s piece Should an Eligible Veteran Ever Choose an FHA Cash-Out Over VA? goes deeper on this.
You want a built-in equity cushion. The 80% cap forces you to keep at least 20% equity. Some veterans see that as a limit. Others see it as protection against a price drop.
The lender’s review favors FHA for your file. The FHA programs Lendmire places files with start at a 580 decision score. Ratios start at 31/43 and can reach 40/50 with documented compensating factors, and the automated finding governs most files. VA has its own underwriting, and lenders layer their own standards on top. Two lenders can give two different answers on the same borrower. If a VA lender declines your file, an FHA lender may not.
The VA benefit test does not work. This one needs a plain-English explanation, so it gets its own section below.
What Is the Net Tangible Benefit Test?
VA’s circular says net tangible benefit standards apply to all cash-out refinancing loans. In plain words, VA wants the refinance to actually help you. It should not just generate fees. Common examples are dropping FHA mortgage insurance, moving to a more stable loan type, or paying off higher-cost debt. If the new loan does not clear the benefit standards, a VA lender cannot make it.
Moving from an FHA loan into a VA loan can count as a benefit, because it can remove FHA mortgage insurance. Lenders apply the full list of criteria, and the rules go beyond what fits here. Ask your lender to walk you through how your file measures up.
Timing matters too. FHA’s rule is clear: you need to have owned and occupied the home for 12 months before the case number. A VA lender will have its own waiting period between loans, and it differs from FHA’s. Confirm it with your lender rather than assuming it matches.
Which Question Are You Really Asking?
Veterans tend to land in one of two camps. The right answer differs for each.
Camp one: you have an FHA loan and want out of the insurance. You may not need cash at all. A VA cash-out refinance can replace the FHA loan with no cash taken, which can remove FHA mortgage insurance. Here VA is usually the natural move, assuming you meet eligibility and the benefit test. Lendmire’s piece Should a Veteran With an FHA Loan Who Needs Cash Use VA Cash-Out? covers this lane in more depth.
Camp two: you want real cash. Here you weigh how much equity you need, how much cushion you want, and how long you will hold the loan. If you need a large share of your equity, only VA reaches that far. If you need a modest amount and want to keep entitlement intact, FHA deserves a hard look.
Many pages blur these two questions. They lead to different answers, so decide which one you are asking first.
Three Scenarios, No Dollar Signs
Consider a veteran with a service-connected disability rating, a primary residence, and an FHA loan carrying monthly insurance. The funding fee is waived. VA removes the insurance and has no ongoing insurance of its own. This is the cleanest VA win.
Say you own a home outright, you are eligible, and you want to pull out a large share of the value for a renovation. FHA stops at 80% of value. VA can go further. The decision comes down to whether you are comfortable with a thin cushion, and whether the funding fee fits the plan.
Picture a veteran who expects to buy a different home with a VA loan in a few years. Using entitlement now could complicate that. A smaller FHA cash-out keeps entitlement untouched. The cost is annual FHA mortgage insurance, which ends after eleven years on a thirty-year loan at this leverage, subject to lender guidelines.
How Do You Decide in Five Steps?
1. Confirm eligibility. Get your Certificate of Eligibility and check your funding fee status with VA.
2. Set your cash target. Decide how much equity you need, as a percentage of the home’s value.
3. Check the ceilings. Compare that target to FHA’s 80% cap and your lender’s VA limit.
4. Weigh the fees against your holding period. Ongoing FHA insurance against one-time VA fee, over the years you expect to keep the loan.
5. Think about entitlement. If another VA purchase is coming, factor that in.
Both programs require income, employment, asset and credit documentation, plus a current payoff statement. VA also needs the Certificate of Eligibility. FHA needs proof of 12 months of occupancy and a clean payment history over that stretch. Gather these early.
What About Other Options?
Two quick alternatives. A conventional cash-out may suit a borrower with strong credit and plenty of equity, though it also caps leverage. A home equity loan or line leaves your first mortgage alone, which matters if the loan you have is hard to replace. Doing nothing is also valid. If the cash is for something optional, borrowing against your home adds interest and risk.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your current one and gives you the difference in cash.
Funding fee: VA’s one-time charge on its loans, which can be financed and is waived for some veterans.
Mortgage insurance premium: FHA’s upfront and annual charges that protect the lender, not you.
Net tangible benefit: VA’s requirement that a cash-out refinance must actually help the borrower.
Entitlement: The amount of VA backing you have available, which can be used and restored over time.
Seasoning: The waiting period a loan or ownership must meet before you refinance.
Frequently Asked Questions
Can I refinance an FHA loan into a VA loan without taking any cash?
Yes, through the VA cash-out refinance, subject to eligibility and lender review. VA’s circular says a cash-out can refinance a non-VA loan, and moving out of FHA can remove FHA mortgage insurance. It must still pass the net tangible benefit standards.
Is the maximum loan really 80% for FHA and 100% for VA?
FHA’s cap is 80% of adjusted value, set by HUD. VA’s ceiling is full reasonable value, fee included. Many lenders set lower limits than the program maximum, so your approved amount may be less.
Does a VA cash-out use up my entitlement?
It can use or reuse entitlement, and a repeat use can trigger the higher funding fee. FHA does not touch entitlement. If you plan another VA purchase, ask a VA lender how this refinance would affect it.
Who is exempt from the VA funding fee?
Veterans receiving service-connected disability compensation and eligible surviving spouses are exempt. Confirm your own status with VA, since eligibility turns on specifics.
Can I use an FHA cash-out on a rental or second home?
No. FHA cash-out is limited to owner-occupied primary residences, and the occupancy rule is what sets the leverage. A different loan type would apply.
Where Should You Start?
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend. Expect the lender to explain your Loan Estimate line by line. That is where the real comparison lives.
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.
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References
2. HUD Mortgagee Letter 2019-11
3. VA News: Funding fee, who pays and who is exempt
4. VA News: You could be losing thousands on your home loan
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How an FHA Cash-Out Refinance Counts Mortgage Insurance · How Mortgage Insurance Differs on FHA Cash-Out and Conventional · Can You Do an FHA Cash-Out Refinance Within the Seasoning Period?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.