The Quick Read: The 90% figure is a common lender-level ceiling and one of VA’s net tangible benefit tests. It is not VA’s own limit. VA allows a cash-out loan to reach 100% of the home’s appraised value, including the financed funding fee, and the wholesale programs Lendmire places files with follow that 100% ceiling. Whatever the ceiling, the loan still needs a VA appraisal, a net tangible benefit, and full credit and residual income underwriting, subject to lender guidelines and full file review.
Where Does the 90% Number Come From?
The 90% number comes from two places, and neither is a VA cap on how much you can borrow. First, it appears in VA’s list of net tangible benefit tests. Second, many lenders use it as their own limit. Those are different things, and it is easy to mix them up.
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: 7.24% as of October 29, 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.
Under 38 CFR 36.4306, the new loan cannot exceed 100% of the reasonable value of the home. VA’s Circular 26-19-05 adds that a financed funding fee cannot push the loan above that value. So the fee sits inside the ceiling, not on top of it.
VA’s own cash-out quick-reference guide also lists a “maintained loan-to-value of 90% or less” criterion. That is one box a loan can check to show the borrower benefits. It is a test, not a limit.
Some lenders choose a lower ceiling than VA allows. That is their own risk decision. Across the wholesale programs Lendmire places VA files with, the cash-out reaches 100% of appraised value including the financed fee. That is the practical reason a quote from one source can look different from another: the ceiling is a lender decision layered over a VA rule.
If you see “up to 90%” in an ad, treat it as one lender’s setting. Ask what the lender’s actual maximum is, and whether the funding fee counts inside it.
What a VA Cash-Out Refinance Is
A VA cash-out refinance is a new first mortgage that replaces your current loan and pays you the difference in cash. VA describes it as a way to take cash out of your home equity to pay off debt, pay for school, or meet other needs. Private lenders make the loan, and VA guarantees a portion of it.
It is not a second mortgage. It is not a home equity loan or a HELOC. Your old loan is paid off at closing, and one new loan takes its place.
Two features make it unusual:
- It refinances any loan type into VA. A conventional, FHA, or USDA loan can be replaced by a VA loan. You do not need an existing VA loan.
- It is owner-occupied financing. The home must be one you occupy, or one a spouse or dependent occupies when the veteran is on active duty. Occupancy is also what decides leverage on any loan, so a rental or second home is simply a different product with different limits.
Lendmire’s VA cash-out refinance program page covers the program overview. This article focuses on the mechanics and the decision.
How the Loan Is Underwritten, Step by Step
Underwriting a VA cash-out is a full file review, not a streamline. Here is the sequence.
1. Confirm eligibility. The certificate of eligibility (COE) from VA decides whether you qualify. Service requirements are VA’s rules. A COE can come through a lender, VA.gov, or by mail.
2. Apply and receive disclosures. The lender must give you the net tangible benefit information within three business days of receiving your application, and again at closing. VA will not guarantee a cash-out if those disclosures were not provided.
3. Full credit and income underwriting. Every VA cash-out gets full underwriting. VA sets no minimum credit score. The wholesale programs Lendmire works with start at a 580 decision score. Some lenders set a higher floor.
4. Residual income decides. Residual income is the controlling test. It measures what is left each month after your debts, taxes, and living costs. The 41% debt-to-income figure is a guideline, not a cap. A ratio above 41% needs residual income well above the table.
5. VA appraisal. The appraiser sets the reasonable value on a Notice of Value. Lenders divide the total loan, including the funding fee, by that value to get the loan-to-value ratio.
6. Closing. You receive a Loan Estimate and a Closing Disclosure, as with any consumer mortgage. The old loan is paid, and any remaining proceeds come to you.
The appraisal matters more than most borrowers expect. A low value shrinks the cash directly, because the ceiling is a percentage of that number.
How the Borrowing Limit Works in Practice
The limit is a straight formula: the appraised value times the allowed percentage, minus everything that has to come out of it. Walk through it in words rather than dollars.
Start with the appraised value. Apply the ceiling, which is 100% under the programs Lendmire places VA files with, or a lower figure if a lender caps it. Then subtract, in order:
- the payoff of your current mortgage,
- any second lien or HELOC that must be paid,
- the financed funding fee, and
- any allowable closing costs paid from proceeds.
What remains is your cash. VA News notes that allowable fees and closing costs may be paid from loan proceeds, which can reduce or eliminate what you owe at closing. It also means those costs shrink the check.
Here is how the ceiling changes the picture for a borrower with a modest balance. Say your home appraises at a value where your current mortgage is about half of it. At a 90% lender cap, the room between your payoff and the cap is roughly forty percent of value, before fees. At 100%, it is roughly half of value, before fees. The extra ten points of value is real cash, which is why the ceiling question matters.
Now a borrower with a high balance. If your mortgage is already near 85% of value, a 90% cap leaves only a thin sliver, and the funding fee and costs can swallow it. At 100%, there is more room, but you are also borrowing nearly everything the home is worth. More room is not always better. Leaving little equity cushion carries its own risk if values fall.
Funding fee inside the ceiling
The funding fee is financeable, and it counts toward the 100%. It is waived for veterans receiving compensation for a service-connected disability and the other exempt groups. The VA funding fee page describes it as a one-time payment, and VA’s page is the place to confirm current exemption categories.
If you are exempt, the fee drops out of the math, and more of the ceiling becomes cash.
Type I and Type II: Which One Is Yours?
VA sorts cash-out loans into two types, and the difference is simple. Per Circular 26-19-05, a Type I loan has a total amount, including the funding fee, that does not exceed the payoff of the loan being refinanced. A Type II loan exceeds the payoff, which means you receive cash.
In plain terms: Type I is a refinance with no meaningful cash back. Type II is the one that puts money in your hands.
Type I loans refinancing an existing VA loan carry extra tests. Fees must be recouped within 36 months under the regulation, and the new loan must reduce the interest rate. Those tests are about making sure the refinance helps you rather than just generating a new loan.
Net Tangible Benefit: The Test Behind Every Cash-Out
Every VA cash-out has to show a net tangible benefit, meaning the new loan is in your financial interest. A loan meets this by passing at least one listed test. The tests include:
- eliminating monthly mortgage insurance,
- a shorter loan term,
- a lower interest rate,
- a lower payment,
- higher monthly residual income,
- refinancing an interim construction or repair loan, or
- keeping the loan at 90% of value or less.
That last one is where the 90% number lives. A loan at 90% or less checks that box automatically. A loan above 90% has to pass a different test instead.
This is why removing mortgage insurance is a common path. A borrower holding an FHA or conventional loan with monthly mortgage insurance can refinance into a VA loan, which carries no mortgage insurance of any kind. That alone can satisfy the test, subject to lender guidelines.
Seasoning: When It Applies and When It Doesn’t
Seasoning is a waiting period, and it applies only when the loan you are paying off is a VA loan. The existing loan must meet the later of two marks: 210 days from the first payment, or the sixth payment. Refinancing a non-VA loan has no seasoning wait under VA’s handbook, though the net tangible benefit and appraisal still apply.
This is one of the places the general rule bends. Someone converting a conventional loan after only a few months can often proceed, while a veteran refinancing a recent VA loan has to wait.
Where the General Rule Breaks
Several situations change the outcome. Know them before you assume the ceiling applies cleanly.
- Low appraisal. The ceiling is a percentage of the appraised value. If the number comes in light, the cash shrinks, and a thin margin can disappear.
- Existing second liens. A HELOC or second mortgage has to be paid or handled in the payoff, which reduces what you receive.
- Streamline confusion. The IRRRL is a different product. It refinances an existing VA loan, including a move from adjustable to fixed, with no VA appraisal and a funding fee unless exempt. It generally cannot put cash in your hands. If you want cash, the IRRRL is not the tool.
- Remaining entitlement. The no-limit and no-down-payment treatment applies with full entitlement. If your entitlement is partly used, speak with a loan officer about how it affects the loan.
- Occupancy. This is for a home you live in. It is not a product for rentals.
- Lender overlays. A lender can set a lower ceiling or a higher credit floor than VA requires. That is the 90% story again.
VA Cash-Out vs. Other Ways to Pull Equity
The comparison depends on what you are trying to do and what your current loan looks like.
| Option | Replaces current loan? | Cash access | Best fit |
|---|---|---|---|
| VA cash-out refinance | Yes | Lump sum at closing | Eligible borrowers wanting cash and no mortgage insurance |
| IRRRL | Yes | Generally none | Existing VA loan, lower rate or fixed switch |
| Home equity loan | No, adds a second lien | Lump sum | Keeping a first loan you like |
| HELOC | No, adds a second lien | Draw as needed | Flexible, ongoing needs |
| Conventional cash-out | Yes | Lump sum | Borrowers not using VA eligibility |
The tradeoff to weigh is your current loan. If you hold a first mortgage with terms you value, a second lien can leave it untouched, while a cash-out replaces it entirely. If your current loan carries mortgage insurance, replacing it with a VA loan changes the monthly picture in a way a second lien cannot.
There is also no true “VA home equity loan.” Equity access under VA goes through the cash-out refinance.
Is It a Good Idea? The Decision in Practice
A VA cash-out makes sense when the cash does something worthwhile and the new loan improves or at least protects your position. It deserves more scrutiny when the main goal is simply having cash.
Consider a few borrower situations.
A veteran with an FHA loan carrying monthly mortgage insurance. The refinance can remove that insurance, which is a listed benefit test. If cash is also needed, the cash-out covers both goals. This is typically the cleanest case.
A veteran with a loan they like and a small cash need. Replacing the whole loan to reach a modest amount of cash may cost more than it returns. A second lien could be the better tool here.
A veteran who wants to consolidate debt. Rolling debts into a long mortgage can lower the monthly obligation, but it also stretches repayment over a longer period. VA News points out that a cash-out adds the amount to the loan, increasing the balance and the interest paid over the life of the loan. The monthly relief is real, and so is the long-term cost.
A few honest cautions apply:
- Your balance goes up, so total interest paid over the life of the loan generally rises.
- Your funding fee is financed, which grows the loan further.
- Equity you spend is equity you no longer have if you sell.
- A “no-cost” offer is not free. The CFPB and VA have warned that perks like no out-of-pocket closing costs are generally added to the loan and raise the balance.
- The CFPB and VA have long been concerned about “churning,” where veterans are pushed to refinance repeatedly. Refinancing again and again without a clear benefit is a warning sign.
If the cash is for something that raises your home’s value or retires costlier debt, the math tends to hold up better. If it funds spending that will not last, the case is weaker.
Key Terms Defined
Reasonable value: The home’s value as determined through the VA appraisal, shown on the Notice of Value.
Net tangible benefit: A listed test showing the new loan is in the borrower’s financial interest.
Residual income: The money left each month after debts, taxes, and living costs, and the controlling VA underwriting test.
Certificate of eligibility (COE): The VA document that confirms you qualify for the program.
Seasoning: The waiting period before a VA loan can be refinanced.
Funding fee: A one-time VA fee that can be financed and is waived for exempt borrowers.
A Checklist for Shopping the Loan
Before you commit, ask any lender these questions:
1. What is your maximum loan-to-value on a cash-out, and does the funding fee count inside it?
2. What minimum decision score do you require?
3. How do you handle second liens in the payoff?
4. Which net tangible benefit test does my loan meet?
5. If my existing loan is VA, does seasoning apply?
6. What will my Loan Estimate show for costs paid from proceeds?
Compare the answers, not just the headline number. A lender quoting 90% and one quoting 100% are not describing the same program.
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.
Frequently Asked Questions
Does VA cap a cash-out refinance at 90%?
No. VA’s ceiling is 100% of the home’s reasonable value, and the financed funding fee counts inside it. Ninety percent shows up as one net tangible benefit test and as a limit some lenders choose. The programs Lendmire places VA files with reach 100% of appraised value, subject to lender guidelines and full file review.
Do I need an existing VA loan to do a VA cash-out?
No. A conventional, FHA, or USDA loan can be refinanced into a VA loan. You do need a certificate of eligibility. Seasoning applies only when the loan being paid off is VA, though the appraisal and net tangible benefit still apply either way.
What credit score do I need?
VA sets no minimum credit score. Lenders add their own floors, and some set higher ones than others. The wholesale programs Lendmire places VA loans with start at a 580 decision score, and residual income is the controlling underwriting test.
What does the funding fee cost on a cash-out?
For a cash-out refinance, the fee is 2.15% for first use and 3.3% for subsequent use. It can be financed into the loan.
Can I use a VA cash-out on a rental or second home?
Generally no. It is owner-occupied financing, meaning you or a spouse or dependent on active duty must occupy the home. Occupancy decides the leverage, and a non-occupied property falls outside this program.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. VA’s own cash-out quick-reference guide
4. VA News: losing thousands on your home loan
5. VA funding fee and closing costs
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: Can You Refinance a VA Loan Again After a VA Cash-Out? · How a VA Lender Sequences VA Cash-Out Refinance Approval · VA Cash-Out Refinance Documentation Needed Before Approval
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.