The Quick Read: At a high loan-to-value ratio (LTV, the loan balance as a percentage of the home’s appraised value), VA is usually the only one of the two that reaches. A VA cash-out can go up to 100% of the appraised value, funding fee included. Conventional cash-out stops well short of that. If you are not eligible for VA, or you are borrowing a modest share of your equity, conventional can be the cleaner path. Eligibility and your equity cushion decide it, not a headline number.
Key Takeaways
- VA cash-out reaches 100% of appraised value. Conventional cash-out sits well below that.
- VA has no monthly mortgage insurance but charges a one-time funding fee, which exempt veterans do not pay.
- Conventional loans above 80% LTV generally bring monthly private mortgage insurance (PMI).
- Borrowing near 100% leaves almost no cushion if home values slip.
- Both paths need full income, credit, and asset review, plus an appraisal.
Side-by-Side
The table below covers the owner-occupied case. Lendmire places VA loans with wholesale programs, and the figures in the VA column come from those programs. All of them are subject to lender guidelines and full file review. The conventional column is stated in plain terms because caps vary by occupancy and unit count.
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 VA’s limit |
| Mortgage insurance | None | PMI usually applies above 80% LTV |
| One-time fee | Funding fee: 2.15% first use, 3.3% after | No funding fee |
| Who qualifies | Eligible veterans and service members (COE) | Any qualified owner-occupant |
| Credit floor | VA sets none; wholesale programs start at 580 | Set by lender and automated findings |
| Controlling test | Residual income | Debt-to-income and automated findings |
| Occupancy | Your own home | Primary residence gets the highest caps |
Two rows deserve a second look. First, the VA funding fee is a one-time charge you can finance. Exempt veterans, such as those receiving VA disability compensation, owe none. Second, the lower down-payment fee tiers do not apply to refinances. Putting more equity in does not shrink the cash-out fee.
How Each Path Actually Works
Start with VA. Federal regulation caps a cash-out refinance at 100% of the reasonable value VA determines for the home, and the rule also requires a net tangible benefit. Both come from 38 CFR 36.4306. In practice, a private lender funds the loan and VA guarantees it. You need a Certificate of Eligibility (COE), which VA issues, and the lender orders a VA appraisal.
The appraisal matters more than people expect. LTV is the total loan, funding fee included, divided by that appraised value. VA Circular 26-19-05 says a financed fee cannot push the loan past the reasonable value. So the fee and your cash both count against the same ceiling.
Net tangible benefit is VA’s way of asking, “Is this loan in the borrower’s interest?” The loan must meet at least one of eight listed benefits. Examples include eliminating monthly mortgage insurance, a shorter term, lower monthly principal and interest, higher monthly residual income, or a new LTV at or below 90%. That 90% figure trips people up. It is one way to pass the benefit test, not a maximum. A loan above 90% simply has to pass on another benefit. The VA Lenders Handbook, Chapter 6 lays out the full list.
Seasoning also applies. For a VA cash-out, that means the later of 210 days from your first payment and your sixth payment. Residual income is the controlling underwriting test. The 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it needs residual income well above the table.
Conventional works through the standard path. That path means full documentation, automated underwriting, an appraisal, and reserves in some cases. Fannie Mae’s Eligibility Matrix sets maximum LTV by occupancy and unit count, and the cash-out limit on a primary residence is far lower than VA’s 100%. Confirm the exact cell for your property before you plan around it. Conventional loans also have their own seasoning rules for the mortgage being paid off.
One more thing. Fannie Mae’s High LTV Refinance option sounds like it might fit a high-LTV borrower. It does not. It is a no-cash-out refinance, so it is not a tool for pulling equity.
When VA Cash-Out Is the Better Fit
VA wins when leverage is the point. Picture a veteran who owns a home with modest equity and wants cash for repairs or to consolidate debt. A conventional cash-out may cap them below what they need. VA’s ceiling reaches much further, because it goes to full appraised value.
It also wins when monthly mortgage insurance would drag down the payment. Conventional borrowers above 80% LTV generally face PMI, which the CFPB says protects the lender, not you. VA has none. The trade is the funding fee instead.
That trade is not equal for everyone, which is why it helps to split the decision:
- Fee-exempt veteran. No funding fee and no mortgage insurance. VA is hard to beat on structure here, if leverage is high.
- First-time VA user, not exempt. The fee is 2.15% of the loan. That is financeable, but it adds to the balance and counts against the 100% cap.
- Repeat VA user. The fee rises to 3.3%. The math tightens, and conventional deserves a real look.
VA also helps when credit is imperfect. VA sets no minimum score. The wholesale programs Lendmire places VA loans with start at a 580 decision score, and each lender can set its own overlays. Some lenders also set tighter leverage than VA allows, so expect the practical ceiling to vary by lender.
You can also use VA cash-out to refinance a non-VA loan into a VA-backed loan. That includes conventional and FHA mortgages. VA treats it as a cash-out with full appraisal and underwriting. Lendmire’s VA cash-out refinance program page walks through how that works.
When Conventional Cash-Out Is the Better Fit
Conventional wins when you do not need much leverage. Say you own a home with plenty of equity and want a moderate amount of cash. If you stay under the conventional cap with room to spare, you skip the funding fee. PMI may not apply, depending on where the final LTV lands. The result can cost less overall than a VA loan carrying a financed fee.
It wins when you are not VA-eligible, which is the simplest case. No COE, no program to choose. Occupancy can also favor conventional: VA is for your own home, while conventional second homes and investment properties carry lower leverage caps, so a borrower who is not buying or refinancing a primary residence will not find VA available at all.
Conventional can also win for a repeat VA user who is not fee-exempt. A 3.3% fee on a larger balance is a real cost. If the conventional cap covers the cash you need, run both comparisons before you commit.
There is a quieter advantage too: equity cushion. A conventional cap forces you to leave a slice of the home’s value untouched. VA lets you spend up to 100% of the appraised value. That flexibility is a feature, but it is also the biggest risk.
The High-LTV Risks Nobody Sells
Borrowing near 100% leaves almost no equity cushion. If values dip, you could owe more than the home is worth. Selling later may then require cash at the table. That is not a reason to avoid VA. It is a reason to ask whether you need every available dollar.
A low appraisal hits each path differently. On VA, the reasonable value is the denominator, so a low number shrinks your maximum loan, fee included. On conventional, a low appraisal shrinks the cap in the same way. Either way, plan for the number to come in lower than you hoped.
Lender overlays matter too. The VA rule allows up to 100%, but individual lenders often set lower limits. Treat that as lender policy, not a VA rule. Ask any lender what leverage they actually use on VA cash-outs before you pay for an appraisal.
Finally, VA has one extra wrinkle. The Handbook limits a refinance of a fixed-rate loan into an adjustable one to 90% of reasonable value when more than one discount point is involved. If you want an adjustable product, ask early.
What Each Lender Needs From You
Expect similar paperwork on both paths:
1. Income documents and employment history.
2. Asset statements, including the source of any large deposits.
3. A payoff statement for the current mortgage.
4. For VA, the COE and a lender-provided net tangible benefit test, with a written comparison of old versus new loan terms.
5. An appraisal ordered by the lender.
Lenders review credit, income, and assets. On VA they also review residual income, which is what is left after your major expenses and obligations. A strong residual income can support a ratio above 41%. A thin one cannot.
Loan Estimate and Closing Disclosure rules apply to both loans. The PMI line on a conventional file appears in the Projected Payments section. Read it before you decide.
Key Terms Defined
- LTV: The loan balance divided by the home’s appraised value, shown as a percentage.
- Funding fee: VA’s one-time charge, financeable, waived for exempt veterans.
- Net tangible benefit: VA’s test that the new loan must meet at least one of eight listed benefits.
- Residual income: The money left each month after major obligations, VA’s controlling test.
- COE: The Certificate of Eligibility VA issues to confirm you can use the benefit.
- PMI: Private mortgage insurance, usually added to conventional loans with under 20% equity.
The Verdict
If you are VA-eligible and need high leverage, VA is the more flexible tool. It reaches 100% of appraised value, with no mortgage insurance. If you are exempt from the funding fee, the case is even stronger.
If you are not eligible, or you need only a modest share of your equity, conventional is often simpler and can cost less. The same goes when a high funding fee on a repeat use would outweigh VA’s structural advantages.
The honest move is to compare both on your own numbers. Ask for the cash you need, the total loan including fees, and the equity you will have left. Then decide.
Frequently Asked Questions
Does VA really cap cash-out at 90% LTV?
No. The regulation sets the ceiling at 100% of reasonable value. The 90% figure is one of the ways to pass the net tangible benefit test. Some lenders set their own lower limits, so the practical ceiling varies by lender and file.
Can I finance the VA funding fee on a cash-out?
Yes. The fee can be added to the loan. The total, fee included, still cannot exceed 100% of reasonable value.
Will a bigger down payment lower my VA refinance fee?
No. The reduced fee tiers tied to down payment apply to purchases, not refinances. A cash-out refinance carries 2.15% for first use and 3.3% for later use, unless you are exempt.
Can I refinance a conventional or FHA loan into a VA cash-out?
Yes. VA treats it as a cash-out refinance with a full appraisal and underwriting. You need a COE, and the loan must meet the net tangible benefit test. Seasoning and lender guidelines also apply.
Is a VA streamline the same as a VA cash-out?
No. The streamline, called an IRRRL, refinances an existing VA loan with no cash out and no VA appraisal. A cash-out takes equity, needs an appraisal, and requires full underwriting.
If You Are Weighing Your Options
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. Every program figure is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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
2. VA Lenders Handbook, Chapter 6
3. Fannie Mae Eligibility Matrix
4. CFPB
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 Get a VA Cash-Out Refinance With an Unpermitted Addition · How to Qualify and Apply for a VA Cash-Out Refinance as a Veteran
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.