The Quick Read: The best program for your situation is a VA cash-out refinance where the funding fee rides inside the new loan, and VA allows that. The fee is the one charge that can raise your loan amount. It counts toward the 100% ceiling on your home’s appraised value, so financing it shrinks the cash you walk away with.
Financing the fee means you bring less money to closing. It also means a bigger balance that accrues interest for the life of the loan. Whether that tradeoff works depends on your equity, your appraisal, and whether you owe the fee at all. Everything below is subject to lender guidelines and full file review, and none of it is a commitment to lend.
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.
What Does “Best Program” Mean Here?
There is no single winning lender or product. The best program for your situation is the one that lets you finance the fee, reaches the equity you need, and fits your credit and income. Lendmire is a mortgage broker, not a lender, so it does not rank companies. It matches your file to a wholesale program.
Here is how to judge a program on this loan. The table below lists the five tests that matter most.
| Test | What to look for |
|---|---|
| Fee financing | Fee can be added to the new loan |
| Ceiling | Up to 100% of appraised value, fee included |
| Credit floor | Decision score starting at 580 |
| Underwriting | Residual income as the controlling test |
| Mortgage insurance | None |
Some lenders set tighter limits than VA does. VA sets the ceiling, and a lender can sit below it. That is why shopping through a broker that works with several wholesale lenders matters more than chasing one name.
How Does a VA Cash-Out Refinance Work, Step by Step?
You apply, the lender orders an appraisal, the file gets full credit and income review, and the new loan pays off your old one. Any leftover proceeds come to you as cash. It is a full-documentation loan, not a streamline.
1. Check eligibility. Your Certificate of Eligibility (COE) from VA decides whether you qualify. Service requirements are VA’s rules, not the lender’s.
2. Pick the loan type. VA treats a cash-out as a loan that refinances any lien against the property. If the new loan stays at or below your payoff, that is the limited form. If it goes beyond the payoff, you receive cash.
3. Get the appraisal. An appraisal is required for cash-out refinancing. The appraised value sets the ceiling.
4. Go through underwriting. Across the wholesale programs Lendmire works with for VA files, the decision score starts at 580. Residual income is the controlling test. That is the money left each month after debts, taxes, and living costs.
5. Show a net tangible benefit. VA wants the refinance to help you in a measurable way. Examples VA lists include dropping monthly mortgage insurance, shortening the term, or lowering the monthly principal-and-interest payment. See the VA cash-out lender call for the examples.
6. Close. Lendmire’s VA cash-out refinance program page walks through what you prepare before this point.
You receive a Loan Estimate and a Closing Disclosure along the way. Read both.
What Is the VA Funding Fee on a Cash-Out Refinance?
The funding fee is a one-time charge on a VA-backed loan, and on a cash-out it is 2.15% for first use and 3.3% after first use. It applies to the loan amount, not the home’s value. Veterans receiving compensation for a service-connected disability, and other exempt groups, do not pay it.
VA publishes the numbers on its funding fee page. A few facts trip people up:
- Equity does not change it. On a refinance, VA says the fee does not shift with your down payment. More equity does not lower the percentage.
- It is not negotiable. VA sets it. It is not a lender charge.
- Old numbers still float around. Some sites show outdated percentages. Use VA’s current figures.
- Past manufactured-home use counts. If you used a VA loan only to buy a manufactured home, you still pay the first-time fee, per VA.gov.
For comparison, a streamline refinance (an IRRRL) carries a 0.5% fee unless you are exempt. That is a different loan with different rules.
How Does Financing the Fee Change the Loan?
When you finance the fee, the loan balance becomes your base loan plus the fee. Your monthly payment is then figured on that larger total, and the extra amount earns interest for the life of the loan. The VA covers who pays the fee and who is exempt in its fee explainer.
Here is the part nobody explains. The fee is a percentage of the loan amount, and the loan amount includes the fee. That circular piece is why the lender’s software, not a back-of-napkin guess, produces the final number.
Now picture two borrowers with the same home and the same appraisal.
- Borrower A finances the fee. The loan climbs by the fee. Cash to closing is lower. The balance is bigger.
- Borrower B pays the fee out of pocket. The loan stays smaller. Borrower B needs cash on hand at closing, and keeps more room under the ceiling.
Neither is wrong. They are different tradeoffs.
What Happens at the 100% Ceiling?
The new loan, including every financed charge, cannot exceed 100% of the VA-determined reasonable value. The fee sits inside that cap. So financing it uses up room that could have been cash in your pocket.
VA’s Lenders Handbook, Chapter 6 states it plainly. Energy-efficiency improvements, up to $6,000, and the funding fee can be included in the loan, but together they must not push it past 100% of reasonable value.
In practice, the lender takes the smaller of two numbers: the cash you want, or the room under the cap. If the appraisal comes in low, that room shrinks. Your cash shrinks with it, because the fee does not shrink.
Think of the cap as a bucket. Your payoff fills part of it. The fee fills more. Whatever is left is your cash. You can also pay the fee out of pocket to keep it out of the bucket.
At the cap you keep no equity cushion. That matters if you sell later, refinance again, or values dip.
What Can and Cannot Go Into the Loan?
On a cash-out, only the funding fee, plus the cost of energy-efficiency improvements, can raise the loan amount. Other allowable fees and charges can be paid from the cash proceeds instead. That is a real difference from what many borrowers assume.
VA’s Chapter 8 spells this out.
| Item | How it is handled |
|---|---|
| Funding fee | Can be added to the loan |
| Energy improvements | Can be added, within VA limits |
| Other allowable charges | Paid from cash proceeds |
So “roll all my closing costs into the loan” is a myth. The costs come out of your proceeds, which lowers your net cash.
Where Does the General Rule Break?
Several edge cases change the answer. Know which ones touch you before you apply.
Fee exemption. Veterans receiving compensation for a service-connected disability and certain surviving spouses are the usual categories VA treats as exempt from the funding fee. Confirm your status on your COE. Exempt borrowers skip this whole decision.
Seasoning on VA-to-VA refinances. If you are replacing an existing VA loan, the wait is the later of 210 days from your first payment and your sixth payment.
Replacing a non-VA loan. A VA cash-out can refinance any loan type into VA. Confirm with your loan officer how seasoning applies to your existing loan, since it depends on the payoff.
Recoupment. VA’s conference material lists a recoupment test on certain VA-to-VA limited refinances. That test asks whether you earn back the costs through savings over time. Ask how it applies to your file.
Adjustable-rate and points. If you move from a fixed to an adjustable loan and pay more than one discount point, VA limits the loan to 90% of reasonable value on the limited form.
Lender overlays. A lender can set a lower cap than VA’s 100%. A 90% limit shows up at some lenders, but that is their choice, not VA’s rule.
Occupancy and state rules. This loan is for your primary residence. Some states restrict cash-out on homesteads, so state rules can affect you.
Should You Finance the Fee or Pay It Up Front?
Finance it if cash at closing is tight and you have room under the ceiling. Pay it out of pocket if you want a smaller balance and keep your cash proceeds. Exempt borrowers skip the question.
| Your situation | Likely lean |
|---|---|
| Short on cash at closing | Finance the fee |
| Want the lowest balance | Pay it up front |
| Need every dollar of cash out | Pay it up front |
| Plan to hold the loan long | Weigh the extra interest |
| Plan to sell or refinance soon | Financing hurts less |
| Exempt from the fee | Nothing to decide on |
Financing the fee is not free money. You pay interest on it. A longer hold time makes that interest add up. A shorter hold time makes it matter less.
A smart question to ask: what does my net cash look like with the fee financed and with it paid in cash? Ask for both. A broker can run both on the same appraised value.
What Does the Borrower Actually Live With?
You trade a bigger balance for less cash at closing. VA’s fee page notes the benefit as no down payment and no monthly private mortgage insurance. That is a real plus when your current loan carries mortgage insurance, and it can serve as your net tangible benefit.
- Payment. It is based on the full balance, fee included.
- Cash received. Financing the fee lowers it at a given appraisal.
- Repeat use. A second or later use carries the higher percentage.
- Equity. At 100%, you have none left in the house.
Key Terms Defined
Funding fee: A one-time charge VA sets on a VA-backed loan. It is a percentage of the loan amount.
Reasonable value: The value VA’s appraisal assigns to the home. It sets the 100% ceiling.
Certificate of Eligibility (COE): The VA document showing you qualify and what entitlement you have.
Residual income: The money left each month after debts, taxes, and basic living costs. It is the controlling underwriting test on a VA loan.
Net tangible benefit: A measurable gain from the refinance, such as dropping mortgage insurance or shortening the term.
IRRRL: VA’s streamline refinance. It needs no VA appraisal and carries a 0.5% fee unless you are exempt.
Seasoning: The waiting period before you can refinance a recent loan.
Frequently Asked Questions
Can the VA funding fee really be added to the new loan?
Yes. For all types of VA loans, the loan amount may include the funding fee. On a cash-out it is the only fee that raises the loan, apart from energy improvements. The fee still counts inside the 100% ceiling on appraised value.
Does financing the fee lower my cash out?
Yes, at a given appraisal. The fee uses room under the 100% cap, so less is left for cash. Paying the fee at closing keeps more of the cap available. Ask your loan officer to show both versions on the same value.
Does having more equity lower the cash-out funding fee?
No. VA says refinance fee rates do not change with down payment, and equity does not change the percentage either. The fee is 2.15% on first use and 3.3% after first use. Only exemption status removes it.
Is a VA cash-out the same as a streamline refinance?
No. A streamline (IRRRL) needs no VA appraisal and carries a 0.5% fee unless you are exempt. A cash-out needs an appraisal, full credit and income review, and can reach 100% of appraised value including the financed fee.
What credit score do I need?
VA sets no minimum score. The wholesale programs Lendmire places VA files with start at a 580 decision score. Some lenders set a higher floor. Final eligibility depends on your full file, including residual income.
Next Step
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 is a mortgage broker that matches your file to wholesale programs, never the lender itself. Ask for both a financed-fee and a paid-fee version of the same loan, so you can see the cash side by side.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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
1. VA: Aq42 Lender Call Jan2019
2. VA News: VA funding fee, who pays and who is exempt
3. VA.gov: VA funding fee and closing costs
4. VA Lenders Handbook, Chapter 6: Refinancing Loans
5. VA Lenders Handbook, Chapter 8: Borrower Fees and Charges and the VA Funding Fee
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: How to Prepare a VA Cash-Out Refinance File for Approval · VA Cash-Out Waiting Period Rules After a Prior Refinance · How to Roll the VA Funding Fee Into Your Loan at Closing
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.