The Quick Read: For most veterans with usable VA entitlement, VA cash-out tends to carry the lighter monthly burden, because it has no recurring mortgage insurance. FHA cash-out fits a veteran who can’t use VA or whose credit profile points toward FHA. Either way, cash-out raises the balance, so neither program guarantees a lower payment. Compare the full payment line by line on each Loan Estimate.
The honest answer comes down to what sits inside the monthly payment. VA charges a one-time funding fee, which can be rolled into the loan. FHA charges an upfront premium plus an annual premium that stays in the payment for years. That recurring line is the main reason VA often wins on monthly cost. But monthly cost isn’t the only variable. Equity access, credit profile, entitlement status and how the cash will be used can flip the answer. This piece walks through those flip points.
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.
Side-by-Side
The table below covers the structural differences. Pricing, points and payment amounts are intentionally left out, since those depend on the borrower and appear on each lender’s Loan Estimate.
| Factor | VA Cash-Out | FHA Cash-Out |
|---|---|---|
| Maximum leverage | Up to 100% of VA reasonable value, fee included | 80% of adjusted value, all liens combined |
| Who can use it | Eligible veterans with a Certificate of Eligibility | Any qualifying owner-occupant |
| Mortgage insurance | None monthly; one-time funding fee | Upfront premium plus annual premium |
| Occupancy history | Occupancy certification rules apply | Owned and lived in for 12 months before the case number |
| Credit approach | Full underwriting, residual income review | FHA scorecard review, ratios from 31/43 up to 40/50 with documented factors |
| Special tests | Net tangible benefit on every cash-out | No net tangible benefit test on cash-out; that test belongs to the FHA Streamline |
The 80% cap is the figure that tends to catch FHA cash-out borrowers off guard. HUD lowered it from 85% to 80% for cash-out case numbers assigned on or after September 1, 2019, citing growth in cash-out refinances and the goal of strengthening borrower equity. The 80% caps the entire new loan, not the cash you receive.
How Each Program Builds Your Monthly Cost
VA’s cost is front-loaded. The funding fee applies to the new loan amount, and the VA Pamphlet 26-7 chapter on the loan and guaranty says it may be financed into the loan. Any portion that would push the loan past 100% of reasonable value has to be paid at closing. A veteran who receives service-connected disability compensation may be exempt from the fee, and the exemption shows on the Certificate of Eligibility. Exemption status can change the comparison considerably.
FHA’s cost is spread out. The upfront premium is 1.75% of the base loan, usually financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan with a higher LTV, the annual premium lasts for the full term. With a lower LTV, it ends after eleven years. HUD cut annual premiums by 30 basis points for mortgages endorsed on or after March 20, 2023. These are program mechanics, not advertised prices, and they vary by file.
One more point matters for the payment: both programs let you finance the upfront charge, which raises the loan balance. A financed fee isn’t free. It’s a bigger balance carrying interest. VA has no monthly premium to set against that cost, while FHA keeps its annual premium in the payment. A veteran who is exempt from the funding fee has an even simpler comparison, since no VA fee is added to the balance.
When VA Cash-Out Is the Better Fit
VA cash-out generally fits the veteran who has entitlement available and wants the lowest recurring cost or the most equity access. Consider these situations:
- Limited equity. VA cash-out reaches up to 100% of reasonable value under the program facts, while FHA stops at 80%. A veteran with limited equity can access materially more cash under VA. That ceiling is firm, and no program lends above it.
- Moving off an FHA loan. A veteran carrying FHA mortgage insurance may find that a VA refinance removes the monthly premium. VA’s cash-out circular requires at least one net tangible benefit, and that test applies to every VA cash-out.
- Disability-based fee exemption. If the funding fee is waived, the one-time cost drops out and the monthly advantage widens.
- Recent purchase. FHA cash-out requires 12 months of ownership and occupancy before the case number. VA’s tests work differently, so a newer owner may qualify sooner under VA. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The tradeoffs are real, though. VA runs a full cash-out underwriting file, not a streamline, with an appraisal that sets reasonable value and a residual-income review. Type I cash-outs also have a fee-recoupment test when refinancing VA-to-VA, and they restrict which charges apply if the payment rises. Using entitlement also has consequences for a future purchase, so a veteran planning another VA loan should weigh that.
When FHA Cash-Out Is the Better Fit
FHA cash-out suits the veteran for whom VA isn’t workable, or whose credit and file shape point toward FHA’s flexibility. Here is when it can win:
- No usable entitlement or no Certificate of Eligibility. If VA isn’t an option, FHA is a standard owner-occupant path.
- Thin or bruised credit. The programs Lendmire places FHA loans with start at a 580 decision score. FHA also allows documented compensating factors to stretch ratios from 31/43 toward 40/50. HUD’s waiting periods after credit events, such as two years from a Chapter 7 discharge or three from a foreclosure, are HUD rules and apply to the file.
- Modest cash need. If the veteran only needs a smaller amount and has well over 20% equity, the 80% cap isn’t a constraint, and the premium difference matters less to the decision.
- Preserving entitlement. A veteran saving VA entitlement for a future purchase might accept FHA’s premium cost now.
The catch is the recurring premium. It stays on the monthly payment, calculated on the outstanding balance, as HUD’s announcement of the premium cut explains. A veteran planning to hold the loan for many years should price that carefully. On FHA, county loan limits also apply and can cap the loan before the 80% ceiling does.
Key Terms Defined
Cash-out refinance: A new mortgage larger than your current payoff, with the difference paid to you.
Funding fee: VA’s one-time charge, which can usually be financed into the loan.
Upfront premium: FHA’s one-time mortgage insurance charge, set at 1.75% of the base loan and usually financed.
Annual premium: FHA’s recurring mortgage insurance, charged on the outstanding balance.
Net tangible benefit: A test showing the refinance helps the borrower in a defined, measurable way. VA applies it to every cash-out.
Entitlement: The amount of VA guaranty a veteran has available to use.
Weighing the Monthly Cost for Your Situation
Skip the question of which program is cheaper in general. Ask which is cheaper for your file. A few checks sharpen the comparison:
1. Ask for a Loan Estimate on each path and compare principal and interest, mortgage insurance, escrow and the financed fee side by side.
2. Check whether you’re exempt from the VA funding fee.
3. Check how much equity you actually have. If you’re above 20% equity and need modest cash, FHA’s cap isn’t binding.
4. Decide how long you’ll keep the loan. A long hold magnifies a recurring premium.
5. Think about what the cash is for. Paying off higher-cost debt may improve monthly cash flow even with a larger balance. Funding a purchase may not.
Be cautious of unsolicited VA refinance pitches. The CFPB and VA have warned veterans about offers that look official, sound too good to be true, or push a refinance soon after closing. Their warning centers on the interest rate reduction loan, but the caution applies to any refinance pitch. Also remember that a streamline isn’t a source of cash. Streamlines are separate no-cash-out products.
The Balanced Verdict
For a veteran with entitlement, adequate credit and a need for either high equity access or lower recurring cost, VA cash-out is usually the stronger starting point. For a veteran without entitlement, or one whose credit and documentation fit FHA better, FHA cash-out is the practical lane, and its premium schedule is the cost to plan around. The flip point is often equity: with limited equity, VA reaches further; with plenty, the gap narrows. Neither guarantees a lower payment, since a bigger balance can outweigh a premium advantage.
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. Reach the team at 828-256-2183, subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Frequently Asked Questions
Does VA or FHA cash-out usually cost less each month?
VA usually does, because it has no monthly mortgage insurance. FHA adds an annual premium on top of principal, interest and escrow. The exceptions come from balance size, since a financed VA funding fee can lift the loan, and from veterans exempt from that fee, who see the largest advantage. Compare both Loan Estimates.
Can I use FHA cash-out if I already have a VA loan, or the reverse?
Yes, in both directions, because cash-out can pay off any lien type. VA cash-out doesn’t require an existing VA loan. Your equity, entitlement and file shape decide which route is practical.
How much equity can each program reach?
VA can reach up to 100% of reasonable value, with the funding fee inside that limit. FHA stops at 80% of adjusted value across all liens combined. That 80% limits the whole loan, not the cash you receive. Veterans with modest equity gain the most from VA’s higher ceiling.
Does the funding fee or FHA upfront premium have to be paid at closing?
Not usually. VA’s funding fee may be financed, except for any portion that would push the loan above 100% of reasonable value. FHA’s 1.75% upfront premium is typically financed too. Financing either one increases the balance, which is why the comparison should include the larger loan amount.
What is the net tangible benefit test?
It’s VA’s requirement that a cash-out refinance deliver at least one measurable benefit to the borrower before the guaranty is issued. VA applies it to every cash-out. A VA system determines much of it automatically. It protects veterans from refinances that mainly benefit the lender.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
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.
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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. Consumer Finance Monitor on ML 2019-11
2. VA Pamphlet 26-7, Chapter 3: The VA Loan and Guaranty
4. VA Circular 26-19-05 (Cash-Out Refinancing)
6. CFPB and VA warning on VA refinancing offers
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 Get an FHA Cash-Out Approved on a Triplex You Live In · How to Get Through the Appraisal on an FHA Cash-Out Refinance · How to Qualify and Apply for an FHA Cash-Out Refinance After 12 Months
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.