The Quick Read: For most eligible military borrowers who live in the home, the VA cash-out reaches more equity and carries no monthly mortgage insurance. The trade is a one-time funding fee and a full file review built around residual income. A conventional cash-out fits borrowers who are not eligible for VA, who are not exempt from the funding fee and want to avoid it, or who are tapping a home that VA’s occupancy rule does not cover. Both options replace your current loan with a bigger one, so neither is free money.
Key Takeaways
- A VA cash-out can reach 100% of the appraised value, including any financed funding fee.
- VA carries no monthly mortgage insurance. It carries a funding fee instead, and veterans who receive service-connected disability compensation are exempt.
- Conventional cash-out generally leaves more equity in the home, and the ceiling shifts with occupancy and unit count.
- VA can refinance any loan type into a VA loan. You do not need an existing VA loan.
- Either way, you take on a larger balance. That is the real cost to weigh.
Key Terms Defined
Cash-out refinance: A new loan that pays off your current mortgage and hands you the extra equity as cash.
Loan-to-value (LTV): Your loan balance divided by the home’s appraised value, shown as a percentage.
Certificate of Eligibility (COE): The document from VA that confirms you qualify for a VA home loan. Your lender can usually pull it for you.
Funding fee: A one-time VA charge, expressed as a percentage of the loan. It can be financed into the balance and is waived for exempt borrowers.
Residual income: What is left of your monthly income after your debts, taxes and the new payment, and typical living costs. VA treats it as the controlling test.
Net tangible benefit: A concrete improvement VA requires from a cash-out. Your lender checks it against VA’s list of eight benefits.
Seasoning: The waiting period before a loan can be refinanced.
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, fee included | Holds back a slice of equity |
| Credit floor | 580 decision score on wholesale programs | Generally a higher floor |
| Mortgage insurance | None | Common when equity left is thin |
| Upfront VA charge | Funding fee, 2.15% first use, 3.3% after | None |
| Occupancy | Home you or your family occupy | Primary, second home, or investment, at different ceilings |
| Documentation | Full file, residual income test | Full file, debt-to-income test |
A few notes on the table. The conventional column is deliberately general. Conventional ceilings move with occupancy, unit count and the lender’s overlays, so a loan officer has to read the live guidelines against your file. The VA column is firmer because the program’s structure is firmer.
What a VA Cash-Out Actually Does
A VA cash-out replaces your current loan with a new VA-backed loan. VA describes it as a way to take cash from your equity or to refinance a non-VA loan into a VA-backed one. You apply through a private lender, not through VA. VA guarantees part of the loan. It does not make it.
Three details matter in practice.
First, the leverage. Across the wholesale programs we place VA files with, the new loan can reach 100% of the appraised value, with the financed funding fee counted inside that number. VA’s own circular on refinancing draws the same line: no guaranty when the loan-to-value ratio goes above 100%. With full entitlement, there is no VA loan limit.
Second, the net tangible benefit. Each VA cash-out has to deliver at least one of VA’s listed benefits to you. The half-percent rate-reduction and fee-recoupment tests belong to the streamline refinance. They do not apply to a VA cash-out.
Third, the type of loan you start with. You do not need an existing VA loan. A VA cash-out can refinance a conventional or FHA loan into VA. The streamline, by contrast, only works on loans that are already VA-guaranteed.
Lendmire’s VA cash-out refinance program page walks through the program step by step.
What a Conventional Cash-Out Does Differently
A conventional cash-out also replaces your loan with a larger one. The difference is how much equity the lender expects you to leave in the house. Conventional guidelines hold back a cushion, and that cushion shifts with the property. A one-unit primary home generally gets a higher ceiling than a multi-unit home. A second home or investment property gets a lower one still.
That flexibility on occupancy is the conventional loan’s real advantage. VA cash-out is for the home you live in. Conventional can stretch to a second home. If you are borrowing against a rental, occupancy decides the leverage, and the lower ceilings apply.
Your Loan Estimate shows the real terms, so compare the two programs there rather than on this page.
When VA Cash-Out Is the Better Fit
VA tends to win when the borrower lives in the home and wants maximum access to equity. Several situations point that way.
You need more than a conventional ceiling allows. If your goal is to pull out a large slice of equity, only a program that reaches 100% of value gets you there. Conventional programs stop short of that by design.
You carry a thinner credit profile. VA sets no minimum score of its own. The wholesale programs we use start at a 580 decision score. Conventional programs generally expect stronger credit, though requirements vary by lender. For a borrower with a recent dent in their score, VA may be the cash-out option that is still within reach.
You want no monthly mortgage insurance. VA’s cash-out page states that the VA home loan program does not require monthly mortgage insurance. A conventional borrower who cashes out down to a thin equity cushion often pays for it every month.
You are exempt from the funding fee. Veterans who receive compensation for a service-connected disability, along with a few other groups, pay no funding fee. For those borrowers, the main cost on the VA side disappears. That tilts the comparison hard.
You hold a non-VA loan today. A conventional or FHA borrower who is eligible can move into VA through a cash-out. That unlocks the no-mortgage-insurance structure.
You are active duty, Guard or Reserve. Eligibility includes National Guard members with at least 90 days of active service. Your certificate of eligibility from VA settles where you stand. A spouse or dependent can satisfy the occupancy requirement while the servicemember is away. Conventional programs have no equivalent carve-out written around military life.
A picture of the VA side
Picture a servicemember with a conventional first mortgage on a primary home. The home has appreciated, and the balance sits near 60% of appraised value. Credit card balances have crept up. A VA cash-out can retire the first mortgage and the cards in one loan, with the new balance well under the 100% ceiling. The lender still has to confirm a net tangible benefit and run residual income. The file is reviewed in full. It is not a rubber stamp.
When Conventional Cash-Out Is the Better Fit
Conventional wins in a narrower set of cases. Be honest about them, because they are real.
You are not eligible for VA. No COE, no VA loan. This is the simplest case.
The funding fee is a deal-breaker and you are not exempt. A first-use cash-out carries a 2.15% fee, and subsequent use carries 3.3%. It can be financed, but a financed fee raises your balance. A borrower who plans to leave a lot of equity in the house may find that conventional costs less over the life of the loan. Conventional files with strong equity left often skip mortgage insurance entirely.
You want to keep a smaller balance anyway. If you only need modest cash, the extra reach VA offers is wasted. A conventional cash-out leaves you with a thicker cushion. That matters if prices soften. The CFPB’s home equity guide notes that lenders typically want you to keep 10% to 20% of your home’s value as equity on these products. That is a general statement, not a VA or conventional rule, but it is a sound habit.
The property is not your primary home. A second home or an investment property is outside VA cash-out, because it is for homes you or your family occupy. Conventional can handle those, at lower ceilings.
You want to preserve VA benefits for another purpose. Some borrowers prefer not to use a VA loan on a given property. Speak with a loan officer about how a new VA loan affects your remaining entitlement before you decide. The answer depends on your file.
The Costs That Do Not Show Up in the Table
Both loans make your balance bigger. VA’s own news piece says the cash-out amount is typically added to the refinanced loan, which raises the balance and the interest paid over time. The CFPB guide says the same: your monthly payment may increase, and the payoff can stretch longer.
Closing costs deserve a separate look. VA says a cash-out typically does not require cash at closing, because allowable costs can come out of the loan proceeds. That is convenient. It also means those costs shrink your net cash and lift your balance. Nothing about it is free.
Seasoning also applies. If the loan you are paying off is a VA loan, the VA cash-out carries the later of 210 days from the first payment and the sixth payment. Ask your loan officer how it applies to a non-VA payoff.
Debt consolidation, specifically
The CFPB found that borrowers often use cash-out proceeds to pay down credit card and auto debt. Credit scores rose at first, then slid back, though they generally stayed above pre-refinance levels. The takeaway is practical. Moving unsecured debt into a mortgage can help your score, but it also puts that debt against your home. Pay off cards you will not run back up.
Tax treatment can depend on your situation. Borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Lenders Check on Each Side
On the VA side, residual income controls the file. The 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it needs residual income well above the table. The appraisal sets VA’s reasonable value, and that value caps the loan. The lender then confirms the net tangible benefit.
On the conventional side, debt-to-income and credit carry more of the weight, and the appraisal tests your equity against the ceiling for your occupancy and unit count.
Some states also limit cash-out on a homestead. That is a state-law question, not a program question, so a loan officer in your state is the right person to ask. Lendmire’s consumer lending is licensed in 16 states.
The Three-Day Cancel Window
A VA cash-out refinances a home that you or your family occupy, and a conventional cash-out on a primary home works the same way. Both come with a right to cancel. A conventional cash-out on a second home or investment property does not carry that right. The CFPB explains that you have until midnight of the third business day to rescind. Saturdays count. Sundays and legal holidays do not. If you cancel, you still owe your original loan. The lender cannot release the cash until the window ends.
The Verdict
Neither loan wins on every file. The honest ranking looks like this.
VA is the stronger tool for eligible borrowers in the home they live in. It reaches more equity, it skips monthly mortgage insurance, and its credit floor is lower. The funding fee is the price, and exempt veterans do not pay it.
Conventional is the stronger tool when VA does not apply, when you want the thickest equity cushion, or when the property is a second home. It has no funding fee, and strong equity often means no mortgage insurance.
The deciding questions are simple. How much equity do you need? Do you live in the home? Are you exempt from the funding fee? What does a bigger balance do to your budget?
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. Ask for a side-by-side before you commit. Any figures remain subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use a VA cash-out if my current loan is not a VA loan?
Yes. A VA cash-out can refinance a conventional, FHA or other non-VA loan into a VA-backed loan. You still need a Certificate of Eligibility and must occupy the home. The streamline refinance is the one that requires an existing VA loan.
Is the VA cash-out limit really 90%?
No. VA’s ceiling is 100% of the appraised value, with any financed funding fee counted inside it. The 90% figure shows up as one of VA’s listed net tangible benefits. Some lenders also set lower limits of their own as an overlay, so the cap you meet can be lower than VA’s. Ask which limit applies to your file.
Does a VA cash-out have mortgage insurance?
No. VA does not require monthly mortgage insurance. It charges a one-time funding fee instead, which can be financed and is waived for exempt borrowers such as veterans receiving service-connected disability compensation. A conventional cash-out that leaves little equity usually carries mortgage insurance.
Can a spouse satisfy the occupancy rule while I am deployed?
Yes. VA’s benefits page says purchase loans and cash-out refinances are for homes that you or your spouse or dependent will occupy. Your lender will document who occupies the home.
Can I cancel after I sign?
For a refinance on your primary home, you have until midnight of the third business day. Your original loan stays in place if you cancel. A waiver is possible only in a genuine personal financial emergency, and the borrower must write the statement themselves.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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 – Cash-out refinance loan
4. CFPB – Using home equity guide
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
7. CFPB – Right of rescission on a refinance
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 Plan and Use a VA Cash-Out Refinance to Go Fixed · How to Get a VA Cash-Out Refinance as an Eligible Veteran Step by Step · VA Cash-Out Refinance vs Conventional Cash-Out That Resets the Mortgage to a New 30 Years
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.