The Quick Read: A VA cash-out refinance reaches higher leverage than a conventional cash-out. It can go up to 100% of the appraised value, with the financed funding fee inside that number. Conventional agency cash-out is capped well below that, and the lower ceiling is the main reason it suits borrowers who only need a modest amount of cash. VA fits eligible veterans who want the most equity. Conventional fits borrowers without VA entitlement, or those who only need a modest amount of cash. All figures are subject to lender guidelines and full file review.
Side-by-Side
The table covers the points that decide which product a file fits. It leaves out pricing on purpose.
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.
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Maximum leverage | Up to 100% of appraised value | Well below 100%, set by agency matrix |
| Funding fee | Yes, financeable, inside the cap | None |
| Mortgage insurance | None | Generally above 80% LTV |
| Credit floor | VA sets none; wholesale programs start at a 580 score | Set by lender and automated underwriting |
| Occupancy | Borrower must live in the home | Lower caps on second homes and rentals |
| Eligibility | Certificate of eligibility and entitlement | No military requirement |
| Seasoning | Applies only when refinancing a VA loan | Title and loan-age clocks |
| Underwriting | Residual income controls | Debt-to-income and reserves |
Who Each Option Is Really For
Veterans, service members and eligible survivors with a certificate of eligibility get the most from VA. The ceiling is higher, there is no monthly mortgage insurance, and the loan can pay off any type of existing mortgage. Conventional is for borrowers who have no entitlement, or who have plenty of equity and want to keep leverage modest.
VA sets the ceiling. Each lender decides whether to use all of it. Across the wholesale programs Lendmire places VA files with, the full 100% structure is available on VA loans, but lender overlays vary, so the number on a pre-approval letter is what counts.
How the Maximum Loan Is Calculated
The formula is simple: appraised value times the allowed percentage, minus what you owe and the costs that come out of proceeds. The appraisal drives everything. A low appraisal shrinks the maximum on both products, and it hurts most at the highest leverage because there is no cushion.
On VA, the cap is 100% of reasonable value as VA determines it. Per VA Pamphlet 26-7, Chapter 6, the VA funding fee, financed in whole or in part, and energy-efficiency improvements up to $6,000 must not push the loan over that 100%. So the fee is not extra room on top. It eats into the cash you walk away with.
Take a modeled home with a payoff that sits at 70% of value. A VA file can in theory reach 100% of value, so the fee and costs come out of a roughly 30% equity slice. A conventional file capped lower leaves a smaller slice. The gap between the two is the real difference in cash.
What the VA Funding Fee Does to Your Cash
The VA funding fee is financeable and waived for veterans receiving compensation for a service-connected disability, plus the other exempt groups. For a cash-out refinance it is 2.15% on first use and 3.3% on subsequent use. VA’s funding fee page confirms the fee applies to refinances unless an exemption applies, and tells borrowers to review the Loan Estimate for all closing costs.
Here’s the catch. At full leverage, the financed fee uses up part of the 100%. Any portion that would push the loan past the cap has to be paid in cash. Exempt veterans keep that room.
When VA Cash-Out Is the Better Fit
VA wins in these situations:
- You want the most equity out. The 100% ceiling is the highest available on an owner-occupied home.
- Mortgage insurance matters to the budget. VA has none, at any leverage. Conventional generally charges it above 80% LTV.
- Your credit is bruised. VA sets no minimum score. The wholesale programs Lendmire works with start at a 580 decision score, which is below what many conventional files need.
- You carry a non-VA loan. A VA cash-out can refinance any loan type into VA, including conventional and FHA loans. The IRRRL is the VA-to-VA streamline. Lendmire’s VA cash-out refinance program page lays out the full-value structure.
- You have higher debt ratios. Residual income is the controlling test on VA. For debt-to-income, 41% is a guideline rather than a cap, so a ratio above it needs residual income well above the table.
- You bought recently. There is no minimum ownership period under VA rules. The VA seasoning requirement, the later of 210 days from the first payment and the 6th payment, is measured on the loan being refinanced when that loan is itself a VA loan.
The Net Tangible Benefit Test
VA requires at least one net tangible benefit. Per VA’s lender call presentation, examples include eliminating monthly mortgage insurance, decreasing the term, decreasing the principal and interest payment, or holding the LTV at or below 90%. That is the VA rule for applications taken after the February 2019 effective date. The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL, not the cash-out.
Type I and Type II
Lenders sort VA cash-outs into two buckets. A Type I does not exceed the payoff, so no equity comes out. A Type II exceeds the payoff, so it does. Some lenders cap Type II lower than Type I. This is a lender overlay, not a VA rule, which is why two lenders can give different answers on the same file. Lendmire’s piece VA Cash-Out Refinance vs. Conventional Cash-Out Under VA Type 1 and Type 2 Refinance Rules goes deeper.
When Conventional Cash-Out Is the Better Fit
Conventional wins in these cases:
- You have no VA entitlement. No certificate of eligibility means no VA loan.
- You need modest cash and have lots of equity. If the ask is well below the conventional cap, the higher VA ceiling adds nothing. You would be paying a funding fee for room you never use.
- You are exempt from nothing and want to avoid the fee. Conventional has no funding fee. For a small cash-out, that can matter more than the absence of mortgage insurance.
- The home is not your primary residence. VA cash-out requires you to occupy the home. Occupancy decides the leverage on a second home or rental, and conventional caps are lower there. A VA loan is not an option for those properties.
- You can stay at or under 80% LTV. Below that line, mortgage insurance generally drops out of the picture, and the VA advantage narrows.
Seasoning Clocks
Conventional cash-out has two waiting periods. Per Fannie Mae Selling Guide B2-1.3-03, an existing first mortgage being paid off must be at least 12 months old, and at least one borrower must have owned the property for six months. Inheritance, legal awards and delayed financing are named exceptions. Delayed financing helps recent all-cash buyers, but it limits the new loan to the documented initial investment plus certain costs, and cash-out pricing applies.
Check both clocks before ordering the appraisal, since a file that overlooks them can stall.
Where These Files Break
Several problems can stall a cash-out file.
- Appraisal shortfall. At 100%, a low value leaves no room. The borrower has to bring cash for the fee or the file shrinks. A reconsideration packet with recent nearby sales can help, but it is no promise.
- Overlay surprise. A borrower reads “100%” and expects it. The lender’s own cap is lower. Ask the lender’s number before paying for anything.
- Residual income misses. Income looks fine on a ratio basis, but the residual falls short for family size and region.
- Entitlement gaps. An old VA loan on the books may be tying up entitlement. If you refinance that same property, entitlement can be restored for the refinance. Otherwise it needs sorting out first.
- Condition problems. The VA appraisal also checks Minimum Property Requirements. Peeling paint or a bad roof can stall a file.
- Manufactured housing. Conventional cash-out on manufactured homes is limited, and single-width homes do not qualify for the limited cash-out product under Fannie Mae’s manufactured housing matrix.
- State caps. Some state laws cap cash-out leverage on a primary home below the federal VA ceiling. Confirm for your state.
The Cost of Taking More Out
Higher leverage is not free money. The new balance, including any financed fee, drives the payment, and taking cash out raises the balance and can stretch the payoff timeline. The CFPB’s guide to using home equity notes that a cash-out replaces the first mortgage with a new, larger one. It is not a second loan stacked on top.
Whether to borrow the full ceiling is a judgment call. Full leverage leaves a thin equity cushion if prices dip, and it limits future options like selling or refinancing again. A borrower who needs only part of the ceiling may be better off borrowing part of it.
Key Terms Defined
Loan-to-value (LTV): The new loan balance divided by the appraised value of the home.
Reasonable value: The value VA’s appraisal assigns, which sets the 100% cap.
Funding fee: A one-time VA fee, financeable, waived for exempt borrowers.
Residual income: What is left of monthly income after debts, taxes and living costs.
Net tangible benefit: A measurable gain VA requires from a refinance, such as ending mortgage insurance.
Seasoning: A required waiting period tied to the age of a loan or length of ownership.
A Balanced Verdict
If you hold VA entitlement, live in the home, and want maximum equity, VA is usually the stronger tool. The ceiling is higher, mortgage insurance is gone, and credit and ratio flexibility is broader. If you lack entitlement, need modest cash, or want to dodge the funding fee, conventional can be the cleaner choice. Neither is right for everyone. The deciding numbers are the appraisal, what you owe, and what a given lender will actually allow.
Frequently Asked Questions
Does a VA cash-out really allow 100% of my home’s value?
VA allows it, and the wholesale programs Lendmire places VA files with support it, subject to lender guidelines and full file review. The funding fee sits inside that 100%, so cash in hand is lower. Some lenders set caps below the VA ceiling.
Does a conventional cash-out require mortgage insurance?
Generally yes when leverage goes above 80% LTV. VA loans carry no monthly mortgage insurance at any leverage. Exact conventional caps come from the agency eligibility matrix and vary by occupancy and unit count.
Can I refinance a conventional or FHA loan into a VA cash-out?
Yes, if you have a certificate of eligibility and sufficient entitlement. A VA cash-out can pay off any type of lien. The IRRRL, by contrast, only refinances an existing VA loan.
Is there a minimum credit score for VA cash-out?
VA sets none. Lenders do. The wholesale programs Lendmire works with start at a 580 decision score, and some lenders set higher floors.
Is there a waiting period before I can do a VA cash-out?
Not for ownership. Seasoning applies only when the loan you are refinancing is a VA loan. Conventional cash-out has title and loan-age clocks instead.
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 and arranges loans through wholesale lenders. Nothing here 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 Pamphlet 26-7, Chapter 6, Refinancing Loans
2. VA.gov funding fee and closing costs
4. Fannie Mae Selling Guide B2-1.3-03
5. Fannie Mae’s manufactured housing matrix
6. CFPB, Using Home Equity guide
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 VA Cash-Out Lending Works When Value Far Exceeds the Loan · How to Get a VA Cash-Out Refinance With an Unpermitted Addition · VA Cash-Out Refinance vs Conventional Cash-Out on a Duplex You Live in
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.