The Quick Read: VA’s ceiling is 100% of the home’s appraised value, and that ceiling includes any funding fee you finance. Most of your equity is available in principle. What you can actually take is the appraised value, minus every payoff, minus financed costs and the fee. Across the wholesale programs Lendmire places VA files with, the 100% ceiling is the program rule, and each lender’s file review decides the rest.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. You can take cash from your equity, or you can refinance a non-VA loan into a VA loan. VA describes the loan as coming from a private bank, mortgage company or credit union, not from VA directly. You need a Certificate of Eligibility (COE), and you must intend to live in the home.
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.
Lendmire’s VA cash-out refinance program page covers the program side. This article covers the equity math, because that is where most borrowers get surprised.
Two facts set it apart from other cash-out loans:
- No monthly mortgage insurance of any kind.
- No VA loan limit on full entitlement.
Key Terms Defined
Equity: The appraised value of the home minus what you owe on it today.
Reasonable value: The value VA’s appraisal assigns to the home. It is the denominator in every loan-to-value calculation.
Loan-to-value (LTV): The total new loan amount, funding fee included, divided by reasonable value.
Funding fee: A one-time VA charge that can be financed into the loan. Veterans receiving compensation for a service-connected disability, and other exempt groups, do not pay it.
Entitlement: The amount VA guarantees on your behalf. A cash-out uses new or additional entitlement, so confirm details against your COE.
Residual income: What is left of your monthly income after taxes, housing costs, debts and basic living expenses. It is the controlling income test on VA loans.
How Does the Loan-to-Value Rule Work?
The rule is 100% of reasonable value, and the fee counts. 38 CFR 36.4306 says the new loan may not exceed 100 percent of the reasonable value VA determines for the home. VA Circular 26-19-05 spells out the arithmetic. Divide the total loan amount, including any financed funding fee, by the appraiser’s reasonable value.
Here is the sequence, step by step:
1. Get the appraised reasonable value.
2. Add up every payoff: the current mortgage, any other liens being cleared, and any interim construction loan.
3. Add financed closing costs.
4. Add the funding fee if you are financing it.
5. Add the cash you want in hand.
6. Divide the total by reasonable value. If the answer is over 100%, the cash comes down until it fits.
The cash you receive is the leftover room. Think of it as reasonable value, minus payoffs, minus costs, minus the fee. Whatever remains under the ceiling is the most cash the structure allows.
A Percentages-Only Example
Picture a home appraised at 100 units of value, with a payoff equal to 60 units. At the full 100% ceiling, you have 40 units of room. Subtract the financed fee and financed costs, and what is left is your cash. A funding fee of 2.15% on the new loan takes a bite of that room, because it sits inside the ceiling too.
Now run the same home at a 90% lender ceiling. The room drops to 30 units before fee and costs. The home and the VA rule did not change. The lender’s policy did. That 10-unit gap is the difference between the program’s ceiling and an overlay.
VA Ceiling vs. Lender Overlay: Where 90% Comes From
Ninety percent is not VA’s general cap. It shows up in two narrow places, and borrowers often mix them up.
| Where 90% appears | What it does |
|---|---|
| Net tangible benefit list | One of eight benefit criteria is a new loan at or below 90% of reasonable value |
| Fixed-to-adjustable Type I | Limits LTV to 90% when more than one discount point is charged |
| Individual lender policy | Some lenders cap cash-out below 100% on their own |
The first two come from VA documents. The VA Lenders Handbook, Chapter 6 covers the fixed-to-adjustable limit. The third is not a VA rule at all. VA sets a ceiling, not a floor. Some lenders choose a lower cap, and some set a higher credit floor than others. That is why two lenders can look at the same home and offer different cash.
The programs Lendmire places VA loans with reach 100% of the appraised value including the financed fee. They accept a 580 decision score and serve loan amounts to $4,000,000 on full entitlement. Everything stays subject to lender guidelines and full file review.
Type I vs. Type II: Which Test Applies?
The type is set by the loan amount compared with the payoff. A Type I loan, including the fee, does not exceed the payoff of the existing loan. A Type II loan exceeds it, which means you receive equity as cash. VA’s lender call slides define both.
| Item | Type I | Type II |
|---|---|---|
| New loan vs. payoff | At or below | Above |
| Cash to you | None | Yes |
| Extra LTV limit | Fixed-to-adjustable with more than one point | None beyond the 100% ceiling |
Most borrowers searching for equity are in Type II territory. Type I matters when you roll costs or a fee into a loan without taking money out.
How Does the Appraisal Set Your Cash?
The appraisal is the single biggest swing factor. Cash-out needs a full VA appraisal, unlike an IRRRL (VA’s streamlined rate-or-structure refinance), which skips it. The appraised reasonable value is the denominator, so every dollar of value that is missing comes straight out of your available cash.
Say you expected the home to appraise at 100 units and it comes back at 95. Your payoff has not moved. The ceiling just fell by five units, and your cash fell by the same five. This is the place where a low appraisal hurts most.
What a borrower can do when the number comes in light:
- Ask the loan officer whether the appraiser can reconsider, and supply recent nearby sales that were not used.
- Lower the cash requested to fit the new ceiling.
- Skip financing the fee, if you have cash on hand to pay it, so more of the ceiling stays available.
- Pause the file and wait until the home’s value supports the amount you need.
An appraisal reconsideration is a routine request, not a dispute. Document it with sales, not opinions.
Who Can Use It? Eligibility Edge Cases
The rule has more reach than most borrowers expect, and a few places where it breaks.
Non-VA loans. You can refinance a conventional, FHA or USDA loan into a VA loan. Seasoning does not apply to those payoffs. The net tangible benefit test and the loan comparison disclosures still do.
VA-to-VA loans. Seasoning applies. Per Circular 26-19-05, the first payment on the old loan must be at least 210 days old, and six monthly payments must have been made. If the old loan is less than a year old, the lender needs a servicer payment ledger. Files that skip the ledger step are the ones that stall.
Free-and-clear homes. Nothing to pay off means the whole ceiling, less fee and costs, is available as cash. Full underwriting still applies.
Occupancy. You must intend to live in the home. A spouse’s occupancy can satisfy this when the veteran is on active duty. If the title raises a rental or second home, occupancy decides the leverage, and a VA cash-out is built for the home you live in.
Prepayment penalties. The new loan may include contractual prepayment penalties owed on the loan being paid off.
State law. Some states restrict how much equity a homeowner can borrow against a primary residence. Check this with a loan officer before assuming the federal ceiling is the number that applies to you.
Credit. VA sets no minimum credit score. Lenders do, and the wholesale programs Lendmire places VA loans with start at a 580 decision score. Lenders set a higher floor, so a decline at one is not a verdict on the file.
What Is the Net Tangible Benefit Test?
It is a written test your lender must give you, showing the refinance helps you in a concrete way. At least one of eight listed criteria must be met. 38 CFR 36.4306 requires it, and VA’s Circular 26-18-30 lists the criteria:
- Eliminating monthly mortgage insurance.
- A shorter loan term.
- A lower interest rate.
- Lower principal and interest payment.
- Higher residual income.
- Paying off an interim construction loan.
- A new loan at or below 90% of reasonable value.
- Converting an adjustable loan to a fixed one.
Here is where borrowers trip. On a cash-out, the payment often goes up because the balance does. So the benefit usually comes from another line on the list, such as clearing an FHA mortgage insurance premium, or from the 90% test. The half-percent rate-reduction and fee-recoupment tests are IRRRL rules. They do not apply to the VA cash-out.
What Does It Cost Against Your Equity?
The funding fee is the main item. It is 2.15% on a first-use cash-out and 3.3% on later use. The reduced down-payment tiers do not apply to refinances. The IRRRL fee is 0.5%. Veterans receiving compensation for a service-connected disability, and other exempt groups, pay none. Check the current VA fee table before you rely on any figure, since VA publishes the schedule.
You can finance the fee. But a financed fee sits inside the 100% ceiling, so every point of fee is a point less cash. Paying it at closing keeps the ceiling clear. Paying it from proceeds is the same math with a different label.
Closing costs work the same way. Third-party costs rolled into the loan shrink the room. Your Loan Estimate and Closing Disclosure show them line by line, and the settlement reconciliation at the end is where you see exactly what came out of your equity.
How Does It Compare With Other Equity Options?
| Item | VA cash-out | HELOC or home equity loan |
|---|---|---|
| Replaces first mortgage | Yes | No |
| Reach into equity | Up to 100% of value | Lender-set combined limit |
| Monthly mortgage insurance | None | Not applicable |
| Appraisal | Full VA appraisal | Varies by lender |
| Underwriting | Full | Varies |
Choosing between them comes down to what you hold now. If your current mortgage is one you want to keep, a second lien leaves it untouched. If you are in a loan with mortgage insurance, or want to reach more equity than a second lien allows, a VA cash-out replaces the whole structure. Compare against an IRRRL too if all you need is a structure change and no cash.
Should You Do It? A Decision Check
Run through these before you start an application:
- Does the appraised value, less payoffs, fee and costs, leave the cash amount you need?
- Can the budget handle the larger balance? At 100% LTV, there is no equity cushion left.
- Does the net tangible benefit test pass on a criterion you can document?
- Is your VA entitlement and COE in order?
- Does income and residual income support the new loan? Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap, and a ratio above it needs residual income well above the table. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The risk of taking everything is plain. With no cushion, a dip in home value leaves you owing more than the home is worth, and selling or refinancing again becomes harder. Taking less than the ceiling is a choice worth pricing against what the cash is for.
Frequently Asked Questions
Does VA cap cash-out refinances at 90% of the home’s value?
No. The regulation caps the loan at 100% of reasonable value. Ninety percent appears as one net tangible benefit criterion and as a limit on fixed-to-adjustable Type I loans with more than one discount point. Some lenders also set their own lower cap. Which one applies depends on your lender and your file.
Do I need equity to do a VA cash-out refinance?
You need enough value to cover your payoffs, costs and fee under the 100% ceiling. Without equity, a Type I refinance with no cash to you may still work. Cash to you only exists when the appraised value leaves room above everything else.
Is the funding fee included in the loan-to-value calculation?
Yes, when you finance it. VA’s Circular 26-19-05 says the calculation divides the total loan amount, funding fee included, by reasonable value. Paying the fee separately keeps it out of the loan and leaves more room under the ceiling.
Can I refinance a conventional or FHA loan into a VA cash-out?
Yes. A VA cash-out can refinance any loan type into a VA loan. The VA seasoning rules apply only when the loan being paid off is a VA loan. The net tangible benefit test and the written loan comparison apply either way.
What happens if the appraisal comes in low?
The ceiling drops with it, and so does your available cash. You can ask for reconsideration with supporting sales, reduce the cash requested, pay the fee outside the loan, or wait. The payoff does not change, so the shortfall comes entirely out of your 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. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
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
1. VA.gov: Cash-out refinance loan
4. VA Lenders Handbook, Chapter 6
5. VA: Aq42 Lender Call Jan2019
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: Best VA Cash-Out Refinance Program With the Closing Costs Rolled Into the Loan · VA Cash-Out Refinance Lenders to Refinance an Existing VA Home Loan · Best VA Cash-Out Refinance Program Up to 100% of the Home’s 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.