The Quick Read: the choice comes down to whether you are VA-eligible, how much equity you want to pull out, and how long you have lived in the home. VA reaches higher on the value of the home and carries no monthly mortgage insurance. It is open only to eligible veterans, service members and certain surviving spouses. FHA is open to any owner-occupant, but it stops at 80% of value and charges mortgage insurance. The living trust mainly changes the paperwork, because the household is still reviewed on credit, income and occupancy under either program.
Here is the honest version. If you are a veteran with a revocable living trust and a real need for cash, VA usually deserves the first look. It lends more against the home, and the trust language is spelled out in federal regulation. If you are not VA-eligible, or you only need a modest amount, FHA is the practical path. If you qualify for both, the decision often turns on how much equity you want left in the house at your age.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 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.
A cash-out refinance replaces your whole mortgage with a new, larger one. The difference between the two balances comes to you as cash. That is a big step for a household living on a pension, Social Security or retirement-account withdrawals. So both sides get a fair hearing below.
Side-by-Side
| Factor | FHA Cash-Out | VA Cash-Out |
|---|---|---|
| Who can use it | Owner-occupants who meet FHA rules | Eligible veterans, service members, some surviving spouses |
| Maximum leverage | 80% LTV | Up to 100% of VA reasonable value |
| Credit floor | 580 decision score on most wholesale programs | Set by the lender, varies |
| Mortgage insurance | Upfront 1.75% plus annual premium | No monthly insurance; one-time funding fee |
| Occupancy | Owned and lived in 12 months before case number | You must live in the home |
| Income review | Ratios, 31/43 base to 40/50 with factors | VA underwriting, including residual income |
| Trust paperwork | Lender reviews trust against HUD rules | VA names the revocable family living trust |
LTV means loan-to-value, the new loan divided by the home’s appraised value. A decision score is the credit result the lender’s underwriting system produces from your file. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Can a Living Trust Close Under Either Program?
For VA, yes, when the trust is built the way the regulation describes. Federal regulation 38 CFR 36.4354 accepts a beneficial interest in a revocable Family Living Trust. The trust must give the veteran, or the veteran and spouse, an equitable life estate. The lien must attach to any remainder interest. And the arrangement must be valid under state law.
Put plainly: you stay in the home for life, and the lender’s claim reaches whatever passes after you. That is the test.
For FHA, the answer depends on the file. FHA’s written guidelines and each lender’s trust review decide it. Lenders look at the same basic things: the trust is revocable, you are a beneficiary, the trustees can borrow against the home, and you live there.
Two points apply to both programs.
- The trust does not qualify; you do. Your credit, income and occupancy decide the outcome. The trust is a title tool, and it changes the paperwork, not the underwriting.
- Irrevocable trusts are a different conversation. VA’s regulation names only a revocable trust. If your trust turned irrevocable, say after a spouse passed away, get an attorney and a lender to look at it before you apply.
How the FHA Side Works for a Retiree
Here is the short version, based on what the wholesale programs Lendmire places FHA loans with typically allow.
Leverage. FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number. On a home worth a given amount, that leaves at least a fifth of the value untouched as your equity. Final terms depend on the lender’s guidelines, the property type, and your complete credit picture.
Occupancy and history. A case number is the file ID FHA assigns when the lender starts the loan. You need to have owned the home and lived in it for 12 months before that point. If you moved in recently, you are not there yet.
Credit. Most of the wholesale programs start at a 580 decision score. HUD itself has a lower tier, but those programs generally do not reach below 580.
Mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, which is financed into the balance. It also charges an annual premium, between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Cash-out at 80% sits inside that tier. HUD has adjusted the annual premium over time, including a 30-basis-point cut announced for forward mortgages, so the current schedule matters. Each figure is subject to lender guidelines and a full file review.
Income. The base ratios are 31/43. The first number is housing cost as a share of income, the second is total debt as a share of income. Documented compensating factors, such as strong reserves or a long payment history, can stretch ratios up to 40/50 for the strongest files. For a retiree, income from pensions, Social Security and distributions generally counts when it is documented and expected to continue. The automated finding governs most files.
Appraisal. An FHA appraisal checks health, safety and property condition, not only value. A home with deferred maintenance can complicate the file.
When FHA Cash-Out Is the Better Fit
FHA tends to win in four situations.
You are not VA-eligible. This one is simple. If you have no Certificate of Eligibility, the comparison is over. FHA is open to any owner-occupant who meets the program rules.
You need a moderate amount of cash. Suppose you own the home outright, or close to it, and you want a cushion for repairs or medical costs. An 80% ceiling leaves plenty of room. You are not using the program’s full reach, so VA’s higher ceiling buys you little.
You value the equity cushion. The CFPB’s guide for older homeowners says lenders typically want you to keep at least 10% to 20% of your home’s value as equity. FHA builds that in, because the program itself caps you at 80%. If values dip, a retiree on a fixed income has more room before the loan is larger than the house.
Your credit is modest but workable. Where the wholesale programs start at a 580 decision score, a borrower with a thinner file may find FHA reachable. Some VA lenders set higher floors than that. Lenders differ, so a broker’s comparison matters here.
Honestly, the cost of FHA is the ongoing premium. At this leverage it stays on the loan for eleven years on a thirty-year term. If you plan to keep the loan a long time, add that to the picture.
How the VA Side Works for a Retiree
VA’s cash-out page says you go through a private bank, mortgage company or credit union, not through VA directly. That is where a broker comes in. The basics:
Eligibility. You need a Certificate of Eligibility, the document that shows VA entitlement. You also need to meet the lender’s credit and income standards and live in the home.
Leverage. VA’s Pamphlet 26-7 says a cash-out loan, including the funding fee, may not exceed 100% of the reasonable value VA determines. That is the program’s ceiling. Many lenders set a lower cap as their own policy. So the ceiling shows what the program allows, not what your lender will offer.
Net tangible benefit. VA Circular 26-19-05 requires every cash-out loan to pass a net tangible benefit test, meaning the refinance has to leave you better off in a defined way. Qualifying benefits include eliminating monthly mortgage insurance, a shorter term, or an LTV of 90% or less. The circular also defines two types. Type I does not exceed the payoff of the loan being refinanced, and Type II does. Final terms follow the full file review.
Existing loan. You do not need an existing VA loan. A cash-out can refinance a non-VA loan into a VA-backed loan. So a veteran with an FHA loan can move into VA.
Cost structure. Per VA, there are no down payments or monthly mortgage insurance. There is a one-time funding fee, which can generally be financed within the loan limit. Closing costs still apply.
Income. VA underwriting reviews your ratios and also residual income, which is what is left from your monthly income after the major obligations and living costs. For a retiree on steady, documented income, residual income can work in your favor. Lenders confirm the income is stable and expected to continue.
When VA Cash-Out Is the Better Fit
VA tends to win in these situations.
You are VA-eligible and need substantial cash. If you want to reach well past 80% of the home’s value, only VA allows it. That could matter for a large home repair, paying off high-balance debts or funding a major medical need. It matters less if you only want a modest amount.
You want to avoid monthly mortgage insurance. VA has none. FHA’s annual premium stays on the loan for eleven years at cash-out leverage. For a household watching every monthly line, that difference is real. The funding fee is a one-time charge, though, so it deserves a hard look.
You hold an FHA loan today. Moving from FHA into VA can end the FHA premium. That can satisfy the net tangible benefit test on its own, since eliminating monthly mortgage insurance is a listed benefit.
Your trust follows the VA language. If your living trust gives you and your spouse an equitable life estate, you are in the structure the regulation describes. The VA General Counsel opinion says an otherwise qualified veteran may obtain a VA-guaranteed loan with title held in such a trust, subject to the lien and state-law conditions.
Your credit file is thin. Lenders often set their own floors, so the program minimum is only part of the story. A comparison across lenders helps.
The catch: VA’s high ceiling is only useful if a lender will actually go there. And more leverage means less cushion.
Where Retirees Get Tripped Up
Retirees tend to hit a handful of snags when a living trust is involved. The trust certification may be incomplete, the trustee powers may be unclear, or the title company may want different wording than the lender does. Gathering the full trust document before you apply helps you catch these early.
Occupancy changes. Both programs are built for a home you live in. If you have moved to assisted living or a second residence, talk to the lender before you apply. That can change the answer.
A trust that became irrevocable. This is common after a spouse dies in a joint trust. It needs an attorney and a lender review.
A spouse who is not a veteran. A non-veteran spouse who is a co-trustee or beneficiary adds a layer to title review. VA’s trust language contemplates the veteran and spouse together. Confirm how your lender treats it.
A paid-off home. Some lenders may require an existing mortgage to refinance. Others may not. Confirm with the lender before you assume either way.
Lender overlays. Program rules set the floor. Lenders may add their own overlays on credit scores and LTV caps, on both programs, so confirm the specifics with each lender.
The Retiree Budget Question
A cash-out refinance can lengthen the time it takes to pay off the mortgage, and the payment may rise because the loan is larger. That comes straight from the CFPB’s guide. Retirees on pensions, Social Security or withdrawals have less room to absorb that.
Think it through with percentages. Say the home is appraised at a given value and your current loan is about a third of it. Under FHA, the new loan stops at 80%. Under VA, the program ceiling is far higher. Same house, but the VA path can leave you with much less equity if values fall or care costs rise later.
The CFPB also found that more than half of cash-out borrowers each year from 2014 to 2019 said they used the money to pay off other bills or debts. Rolling unsecured debt into your mortgage can feel like relief. It also puts your home behind those debts.
Think about heirs, too. A bigger mortgage balance means less equity passing through the trust. For many retirees, that is the real cost of cash-out, more than any premium or fee.
Key Terms Defined
Revocable living trust: a trust you can change or cancel while you are alive, usually holding title to your home.
Equitable life estate: your right to live in and use the home for life, even though the trust holds legal title.
Net tangible benefit: a VA test that requires a cash-out refinance to leave you better off in a defined way.
Funding fee: the one-time VA charge, generally financeable within the loan limit.
Residual income: monthly income left after major obligations and living costs, which VA reviews alongside ratios.
Mortgage insurance premium: FHA’s upfront and annual charges that protect the lender and stay on the loan for a set period.
The Verdict
If you are not VA-eligible, FHA is your path, and it works fine for a moderate cash need and a cushion of equity. If you are a VA-eligible veteran, VA is usually the stronger first look. It has no monthly mortgage insurance, a higher ceiling, and trust language written into federal regulation. VA still runs through a lender who may set its own limits, and more leverage costs you cushion.
The honest middle ground: veterans who need modest cash and care about keeping equity may find FHA’s 80% cap a feature, not a flaw. Veterans who need large sums, or who carry FHA premiums today, usually find VA’s structure better. Either way, the trust is a paperwork task, not a barrier, as long as it is revocable and the language fits.
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
Can I close an FHA or VA cash-out refinance with my home in a revocable living trust?
Often yes, but the two programs differ on how clearly the rule is written. VA’s regulation names the revocable Family Living Trust giving an equitable life estate. For FHA, the lender reviews the trust against HUD requirements, and lender approaches vary. Either way, you still qualify on credit, income and occupancy.
Do I need to deed my home out of the trust first?
Not necessarily. Many files close with the home in a qualifying revocable trust. Whether a lender asks you to move title depends on its review of your trust and the title company’s requirements. Ask before you start, since deeding out can have its own consequences for your estate plan.
Can I refinance my FHA loan into a VA cash-out?
Yes, if you are VA-eligible. VA’s cash-out page says a non-VA loan can be refinanced into a VA-backed loan. Ending the FHA monthly premium can also help the loan meet VA’s net tangible benefit test.
Does retirement income count for these loans?
Documented, stable income that is expected to continue generally can count, including pensions, Social Security and regular distributions. Lenders verify it through their own documentation rules. VA also reviews residual income, while FHA leans on the ratio approach, so the same income can read differently under each.
What if I move to a care facility after closing?
Both programs are built around a home you live in, and occupancy is part of the rules at closing. Life changes after closing are a conversation for the servicer, an attorney and your family. If a move is already likely, raise it with the lender before you apply.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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. 38 CFR 36.4354 — Cornell Legal Information Institute
2. HUD FHA INFO 2023-11 (Mortgagee Letter 2023-05)
3. CFPB’s guide for older homeowners
5. VA Pamphlet 26-7, Chapter 3
7. VA General Counsel Precedent Opinion 26-95
8. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 to Handle Spousal Consent on a Retiree’s FHA Cash-Out · How a Lender Pays Off Credit Cards at Closing on an FHA Cash-Out · How to Get an FHA Cash-Out on a Home Owned Before Marriage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.