The Quick Read: Both loans replace your current mortgage with a brand-new one, so both can restart your payoff clock. The VA version is built for eligible veterans and service members who want to reach the most equity, with no mortgage insurance. The conventional version fits borrowers who are not VA-eligible, or who have plenty of equity and want a simpler file. Neither one forces a 30-year term. You choose the term.
The honest answer on who each option is for: if you hold a VA Certificate of Eligibility, the VA loan is usually worth pricing first. It reaches further into your equity and carries no monthly mortgage insurance. If you don’t have eligibility, conventional is the path, and the real work is deciding how much equity to take and which term to pick. Lendmire’s VA cash-out refinance program page lays out the VA side in more detail.
Key Takeaways
- A VA cash-out can reach 100% of the appraised value, including the financed funding fee. Conventional cash-out generally asks you to keep a real equity cushion.
- The VA loan carries no mortgage insurance. It does carry a one-time funding fee, which is waived for exempt veterans.
- The VA loan uses pass/fail tests, namely a net tangible benefit and seasoning. Conventional leans on loan-to-value, debt-to-income, credit and reserves.
- The “30-year reset” is a term choice on both loans. A shorter term, or a term that matches your remaining years, is usually available.
- A VA cash-out can pay off any loan type, so you do not need an existing VA loan.
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: 7.18% as of November 5, 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.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Maximum leverage | Up to 100% of appraised value | Lower; equity cushion required |
| Multi-unit homes | Occupancy rules apply | Lower caps than one-unit homes |
| Credit floor | 580 decision score in our wholesale network | Generally higher; varies by lender |
| Mortgage insurance | None | Depends on leverage and lender guidelines |
| One-time fee | VA funding fee, financeable | No VA fee; normal closing costs |
| Occupancy | Owner-occupied; you certify | Primary home is simplest; other uses face lower caps |
| Gate tests | Net tangible benefit and seasoning | Loan age and seasoning rules can apply, depending on the lender |
| Underwriting focus | Residual income | Debt-to-income, reserves |
| Who can use it | Holders of a VA Certificate of Eligibility | Any qualified owner |
The table shows where the programs differ in structure. It does not show cost, because cost depends on your file. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
What Does “Resetting to a New 30 Years” Actually Mean?
A cash-out refinance does not extend your old loan. It pays that loan off and creates a new one, with a new note and a new payoff date. The Federal Reserve’s consumer guide to refinancing puts it plainly: you pay off your existing mortgage and create a new one.
The 30-year part is where people get confused. Neither VA nor Fannie Mae requires you to pick 30 years. Term is your choice at the start, within what the lender offers.
Picture a borrower eight years into a 30-year mortgage. They have 22 years left. If they take a new 30-year term, they add eight years to the payoff horizon. If they pick a 25-year or 20-year term, they can pull that horizon back in. Same cash-out, very different total interest.
Here is the tradeoff in plain words:
- A new 30-year term usually gives the smallest monthly obligation. It also stretches the payoff and raises the total interest paid over the life of the loan.
- A shorter term raises the monthly obligation but gets you out of debt sooner.
- A term matched to your remaining years keeps your original finish line. You take the cash, but you don’t give back the years you’ve already paid down.
The CFPB’s guide to using home equity warns that a cash-out refinance may extend the time it takes to pay off the mortgage. That warning is accurate, and it is also optional. You can design around it.
One more thing about the reset. It also applies to the whole balance, not only the cash. You’re not borrowing just the new money. You are borrowing everything on a fresh schedule, and in the early years of any new loan, more of each payment goes to interest than to principal. Repeat cash-outs every few years and you keep restarting that stretch. It’s the quiet cost of treating a home like a rolling line of credit.
When the VA Cash-Out Is the Better Fit
The VA cash-out wins when you are eligible and want maximum access to your equity without monthly mortgage insurance. It is also the most flexible way to move out of a non-VA loan, because it can refinance any loan type into a VA loan.
You need to reach more equity. A VA cash-out can go up to 100% of the appraised value, and that ceiling includes the financed funding fee. Many conventional programs ask you to leave a meaningful equity cushion, and the cap tightens further on multi-unit homes. If you have modest equity, the VA ceiling can be the difference between a workable plan and none.
You want no mortgage insurance. VA loans carry no mortgage insurance of any kind. Instead there is a one-time funding fee. On a cash-out, that fee is 2.15% on first use and 3.3% on subsequent use. It is waived for veterans who receive compensation for a service-connected disability, and for the other exempt groups. The fee can be financed, but it counts inside the 100% ceiling, so it reduces the cash you can take.
You’re carrying a conventional or FHA loan and want out. The VA cash-out is not limited to people who already have a VA loan. It can pay off a conventional, FHA or VA mortgage. VA’s own refinancing chapter of the Lenders Handbook treats non-VA-to-VA as a standard category, and it requires a net tangible benefit on every cash-out.
Your credit is rebuilding. VA itself sets no minimum score. Across the wholesale programs Lendmire places VA loans with, the floor starts at a 580 decision score. Some lenders set a higher floor, so the number you see depends on who reviews the file.
Your income is uneven but your residual income is strong. VA underwriting uses residual income as the controlling test. That is the money left each month after major obligations and living costs. VA treats a 41% debt-to-income ratio as a guideline, not a cap. A ratio above that level calls for residual income well above VA’s standard, but it is not an automatic stop.
What you give up with VA is simplicity. The loan comes with gates a conventional loan doesn’t have.
The VA gates in plain English
The VA’s lender call on the cash-out rules spells out the main requirements:
- The new loan, with all financed fees and charges, must be at or below 100% of the appraised value.
- The loan must show at least one of eight listed net tangible benefits. Examples include keeping the loan at or below 90% of value, refinancing an interim construction loan, increasing monthly residual income, or moving from an adjustable-rate loan to a fixed-rate one.
- The lender must give you a comparison of the old and new loan at application and again at closing.
- Seasoning applies. For a loan that pays off an existing VA loan, that means a minimum number of on-time payments and elapsed time.
One clarification that trips people up. The half-percent rate-reduction test and the fee-recoupment test belong to the VA’s streamline refinance, the IRRRL. They do not apply to the VA cash-out. The cash-out has its own tests: the net tangible benefit, seasoning and the 100% ceiling.
A cash-out is also not a streamline. It requires a full VA appraisal, full underwriting, and the cash-out disclosures. If you only want to lower your payment on an existing VA loan and take no cash, that is a different product.
When the Conventional Cash-Out Is the Better Fit
Conventional cash-out is the better fit when you are not VA-eligible, when you have a large equity cushion, or when you would rather not deal with VA’s extra gates. For borrowers with strong credit and meaningful equity, it can be the plainer file.
You don’t have VA eligibility. This settles it for many people. Without a Certificate of Eligibility, the VA option is off the table, and conventional is the main route for taking equity out of a primary home.
You have lots of equity and don’t need the ceiling. If you only want to take a modest slice of your equity, the VA’s 100% reach doesn’t matter to you. Conventional programs generally want you to keep an equity cushion, and that is not a problem if you already have one. At lower leverage, the mortgage insurance question also tends to fade, depending on lender guidelines.
You’d rather not pay a funding fee. Conventional has no VA funding fee. You pay normal closing costs instead, and how those compare to VA’s depends on your loan size and your file. On a Loan Estimate, line them up side by side.
Your credit is strong. Conventional programs generally set higher credit floors than the 580 decision score on the VA side. If your score is well above those floors, the floor difference won’t matter.
You’d rather keep your entitlement out of this loan. Some borrowers prefer to keep VA benefits out of a particular transaction. That is a personal planning call. Ask a loan officer how a VA loan on this home would interact with your remaining entitlement before you decide.
Conventional has limits too. Fannie Mae’s eligibility matrix sets maximum loan-to-value by transaction type, number of units and occupancy. In general, cash-out caps are lower than purchase caps, and lower again for multi-unit homes. Second homes and investment properties face tighter caps as well. If the home is your primary residence, you’re in the simplest lane.
A few other conventional wrinkles:
- Loan age and seasoning rules can apply, depending on the lender.
- Property type matters. Some manufactured-housing configurations are not eligible for cash-out.
- Some states add their own cash-out rules, so check your state before you plan around a number.
The Reset Question, Decision by Situation
Instead of asking “which loan,” ask “what is this cash for, and what term fits?” Here is how it tends to play out.
Early in your current loan (first few years). You’ve paid mostly interest so far. A new term costs you little in lost progress. Taking a new 30-year term here adds only a few years to your finish line.
Late in your current loan. This is where a full reset hurts. Fifteen years of principal progress, traded for a fresh 30-year schedule, can add a lot of total interest. If you go ahead, choose a shorter term or one that matches your remaining years.
You’re paying mortgage insurance on a conventional loan today. A VA cash-out can replace that loan with one that carries no mortgage insurance, if you’re eligible. That’s often the most practical reason to switch, with or without taking cash.
You want to consolidate credit cards. Be careful. The Federal Reserve notes that many financial advisers caution against using cash-out refinancing to pay down unsecured debt or short-term secured debt. You’re swapping short debt for long debt that your home secures. If the card balances come back, you’ve lost on both sides.
You want a repair or renovation fund. A cash-out can work well here, because the money may add value to the home. A home equity line of credit leaves your first mortgage alone. The CFPB suggests considering options with lower up-front costs, such as a HELOC, so price both.
You just want to keep your finish line. Ask for a term matched to your remaining years. Many lenders offer terms between the standard 30, 20 and 15 years. If the exact term you want isn’t on the menu, pick the closest shorter one.
The cash amount stays the same. The payoff horizon and the total interest change a lot.
The Risks Both Loans Share
A cash-out refinance is a loan you must repay, and your home secures it. That sentence applies equally to VA and conventional loans.
Three risks are worth naming:
1. A bigger balance. You owe more than you did before, which leaves less equity as a safety margin if home values dip.
2. A longer payoff. Covered above. It’s a choice, not a fate.
3. Closing costs on the whole loan. You’re paying to originate a new mortgage, not just to access the cash. Compare the Loan Estimate for a cash-out against what it would cost to keep the loan you have.
The CFPB also points borrowers to HUD-approved housing counseling agencies, which can help you think it through. If a prepayment penalty applies to your current loan, weigh it against the savings you expect, as the Federal Reserve advises.
Key Terms Defined
Cash-out refinance: A new mortgage that pays off your old one and gives you the difference in cash, drawn from your home equity.
Loan-to-value (LTV): The loan amount divided by the home’s appraised value, shown as a percentage.
Net tangible benefit: A VA test that requires the refinance to leave the veteran better off in at least one of eight listed ways.
Seasoning: The waiting period, in on-time payments and elapsed time, that VA wants before certain refinances.
Funding fee: A one-time VA fee, financeable and waived for exempt borrowers, that replaces monthly mortgage insurance.
Residual income: What’s left of your monthly income after major obligations and living costs. It is VA’s controlling underwriting test.
Certificate of Eligibility (COE): The VA document that confirms you qualify for a VA loan.
A Balanced Verdict
If you’re VA-eligible and want to reach more equity, or you’re currently paying mortgage insurance, the VA cash-out deserves a hard look. The 100% ceiling, the lack of mortgage insurance and the lower credit floor in our network give it real structural advantages. The price of those advantages is the funding fee (unless you’re exempt) and a couple of extra tests.
If you aren’t VA-eligible, or you only want a modest amount of cash from a home with lots of equity, conventional is the straightforward answer. It has fewer special gates and no funding fee, though it asks for a larger equity cushion and generally a higher credit score.
The 30-year reset belongs in a different box. It is not a feature of either loan. It’s a decision you make at the term menu. Whichever loan you choose, ask to see the numbers at a fresh 30 years, at a shorter term, and at a term that matches your remaining years. Then decide how much extra interest the lower monthly obligation is worth to you.
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, so it arranges these loans through wholesale lenders, and every program detail is subject to lender guidelines and full file review.
Frequently Asked Questions
Do I need an existing VA loan to do a VA cash-out refinance?
No. A VA cash-out can pay off a conventional, FHA or VA mortgage. You do need a VA Certificate of Eligibility, and the new loan must pass VA’s net tangible benefit test. If the loan you’re paying off is a VA loan, seasoning applies as well.
Does a VA cash-out really let me borrow 100% of my home’s value?
The 100% is a ceiling, not a promise. The new loan, including the financed funding fee and other charges, must stay at or below 100% of the VA-appraised value. Some lenders set a lower cap of their own, and the amount you can take depends on the appraisal, the financed fee and your underwriting.
Is a new 30-year term required on either loan?
No. Term is your choice on both loans, within what the lender offers. A longer term usually lowers the monthly obligation and raises total interest. A shorter term does the opposite. You can also ask for a term that matches the years left on your current mortgage.
Is a VA cash-out the same as a VA streamline refinance?
No. The streamline (IRRRL) refinances an existing VA loan, requires no VA appraisal and carries a 0.5% funding fee unless you’re exempt. The cash-out needs a full appraisal, full underwriting, the net tangible benefit test and cash-out disclosures. The streamline’s rate-reduction and recoupment tests do not apply to the cash-out.
Should I use a HELOC instead of a cash-out refinance?
It depends on what you need. A HELOC leaves your first mortgage in place, while a cash-out replaces it. If your current first mortgage is one you want to keep, a HELOC may cost less up front. If you want to replace the first loan anyway, a cash-out can do both jobs in one transaction.
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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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. Federal Reserve, A Consumer’s Guide to Mortgage Refinancings
2. CFPB, Using home equity to meet financial needs
3. VA Pamphlet 26-7, Chapter 6, Refinancing Loans
5. Fannie Mae Eligibility Matrix
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 Requirements on a Home With No Mortgage · VA Cash-Out Refinance Requirements Within a Year of Buying
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.