The Quick Read: The cash you walk away with is the new loan ceiling minus everything the new loan has to pay off. A second lien does not sit on top of the ceiling. It gets paid off from the new loan, so a bigger second lien means less cash to you. The ceiling is up to 100% of the appraised value, including the financed funding fee, and lender policy or a low appraisal can pull it lower.
Key Terms Defined
Cash-out refinance: a new loan that replaces your current mortgage and puts the leftover equity in your pocket.
Second lien: a loan recorded behind your first mortgage, such as a home equity loan, a HELOC (home equity line of credit), or a second mortgage.
Funding fee: the one-time VA charge on most VA loans. It can be financed into the loan, and exempt veterans do not pay it.
Subordination: when a second lienholder agrees to stay behind a new first loan instead of being paid off.
Certificate of Eligibility (COE): the VA document that shows your entitlement and decides whether you qualify.
Net tangible benefit: a VA test that the refinance must leave you better off in a way VA lists.
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.
The Formula in One Line
Start with the appraised value. The VA cash-out can reach 100% of it, with the financed funding fee counted inside that figure. Subtract the payoff on your first mortgage. Subtract the payoff on any second lien. Subtract the financed funding fee and any closing costs rolled into the loan. What remains is your cash.
The VA Lenders Handbook, Chapter 6 says the loan may not exceed 100 percent of the property’s reasonable value as VA determines it. It also says the new loan must hold first-lien position. That one rule explains most of what follows.
Think of the ceiling as a bucket. Every dollar of existing debt goes in first. Only what is left over becomes cash. The second lien is not extra room. It is one more thing the bucket has to hold.
Does the Second Lien Reduce Your Cash?
Yes. A VA cash-out is a replacement first loan. The handbook allows a cash-out to refinance any type of lien, including a second mortgage or a mechanic’s lien. In practice, that means the second lien is paid off at closing out of the new loan.
Here is the picture in percentages. Say your home is appraised at 100% of value. Your first mortgage is 55% of that value and your second lien is 15%. Together that is 70% of value in existing debt. The new loan can reach 100%, so the room left for cash is about 30% of value, before the funding fee and costs come out. Without the second lien, the same home would leave about 45% of value before those deductions.
Same house. Same ceiling. The second lien took 15 points of value out of your hands.
That is the answer most borrowers are looking for. The second lien does not add to the cash. It competes with it.
Why Subordination Rarely Saves the Day
Chapter 6 says all other lienholders must agree to subordinate to the VA loan if they stay. That sounds like a way to keep the second lien and still pull full cash. The math says otherwise.
The cash-out is sized against 100% of value. If the second lien stays in place behind a new loan that already reaches the ceiling, the total debt on the home would exceed value. So on a cash-out, the practical plan is almost always payoff.
Subordination matters more on the streamline. The IRRRL, VA’s interest rate reduction refinance, cannot pay off liens other than the existing VA loan, so a second lien there has to subordinate. It also cannot put cash in your hands. If you want cash, the IRRRL is the wrong tool. VA also warns on its interest rate reduction loan page about misleading refinance offers, so read any offer closely.
The same logic covers a HELOC. If the HELOC lender will not subordinate, the cash-out pays it off. Even if it would subordinate, a full-ceiling cash-out leaves no room for it.
Step by Step: How the File Gets Built
Here is the order a VA cash-out file follows, from the first call to the cash number.
1. Confirm eligibility. You need a COE, satisfactory credit, and enough income for the new obligations. You also have to live in the home. VA’s cash-out page sets those basics.
2. Order the appraisal. The lender orders it. The appraised value sets the ceiling.
3. List every lien. First mortgage, second mortgage, HELOC, and any other recorded lien. Each one needs a payoff or a subordination plan so the new VA loan sits first.
4. Run the net tangible benefit test. Every VA cash-out must pass it. The regulation lists eight benefit criteria, and the cash-out must meet one of them. A loan-to-value ratio at or below 90 percent is one. Eliminating mortgage insurance is another. The VA Loan Guaranty conference materials walk through them.
5. Underwrite. Credit, income, and residual income come next. Residual income is what is left of your monthly income after taxes, debts, and basic living costs. It is the controlling test on VA loans. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
6. Do the cash arithmetic. Ceiling minus all payoffs, minus the financed fee, minus costs rolled in.
Across the wholesale programs Lendmire places VA loans with, this sequence is how files move. The cash figure is the last thing you can pin down, because it depends on the appraisal and every payoff.
What Shrinks Your Cash
Five things take bites out of the number. Every one of them is worth checking before you plan around a figure.
- The appraisal. A lower value lowers the ceiling dollar for dollar. If the home appraises thinner than you hoped, the cash drops by the whole gap, and the payoffs stay the same.
- The funding fee. On a cash-out refinance the fee is 2.15% for first use and 3.3% for later use. It can be financed, but financing it uses up room under the ceiling. Veterans who receive compensation for a service-connected disability, and the other exempt groups, do not pay it. That can add meaningful cash back.
- Closing costs. If they are rolled into the loan, they come out of the cash. If you pay them out of pocket, the cash stays higher.
- Lender limits. The VA rule allows 100%, but a lender may set its own lower cap. Some lenders stop short of full value. The wholesale programs Lendmire places VA cash-outs with reach 100% of the appraised value, including the financed fee, but each file is still subject to lender guidelines and full review.
- Other liens. A mechanic’s lien or a second mortgage you forgot about still has to be paid off or dealt with. Any such lien reduces the final cash figure below the first estimate.
Three Scenarios, Told in Percentages
None of these use dollar figures. Each starts from an appraisal at 100% of value, and each shows cash before the fee and costs come out.
| Equity picture | First mortgage | Second lien | Room for cash |
|---|---|---|---|
| Thin | 80% of value | 10% of value | About 10% |
| Moderate | 60% of value | 10% of value | About 30% |
| Strong | 40% of value | 5% of value | About 55% |
In the thin case, the fee and costs can swallow most of what is left. A 2.15% fee on a loan near full value takes a real bite out of a 10% cushion. Run that file with care.
In the moderate case, the second lien costs you 10 points of value. Without it, you would have about 40% of value in room for cash. That is the difference between a comfortable result and a tighter one.
In the strong case, the second lien matters less because there is so much room. The fee and costs are a smaller share of what you receive.
Notice what the table does not show. It does not show the second lien staying put and adding to your total. It cannot. The new first loan has to cover it.
Where the General Rule Breaks
If the second lienholder agrees to subordinate. Chapter 6 permits it. But as covered above, a cash-out sized to the full ceiling leaves no room. Subordination can make sense only when the new loan is well under the ceiling, and that is an unusual way to use this program.
If you are refinancing a non-VA loan. That works fine. VA’s cash-out page says you can refinance a non-VA loan into a VA-backed one. You do not need an existing VA loan.
If you are refinancing a VA loan. Seasoning applies in that case. The later of 210 days from the first payment and the sixth payment must pass. Seasoning applies only when the loan being refinanced is a VA loan.
Type I versus Type II. A cash-out where the new loan, including the fee, exceeds the payoff of what it replaces is called Type II. If the new loan does not exceed the payoff, it is Type I, which only pays off existing liens and puts no cash in your hands.
Entitlement. Replacing an existing VA loan can use up or require additional entitlement. Your COE shows what you have. With full entitlement there is no VA loan limit. With only remaining entitlement, a down payment may be required, so speak with a loan officer about your own file.
Occupancy. You must live in the home. A spouse or dependent can satisfy occupancy for an active-duty service member. If you are thinking of a rental, the answer is short: occupancy decides leverage, and this program is for the home you live in.
Older rules. Some borrowers still hear that VA cash-outs top out at 90%. That was the old regulation. VA revised it in the 2018 Federal Register rulemaking, and the current ceiling is 100%. The 90% figure now lives on as one net tangible benefit criterion, not the cap. Some states also add their own limits on cash-out loans, so ask about your state. Every parameter remains subject to lender guidelines and full file review.
First Mortgage Replaced, or Kept?
Here is the honest comparison between a VA cash-out and leaving your first mortgage alone and adding a second lien for cash.
| Factor | VA cash-out | Keep first, add second |
|---|---|---|
| Lien position | New loan is the first lien | Existing first stays |
| How cash is sized | Up to 100% of value, minus payoffs | Based on combined loan-to-value |
| Existing second lien | Paid off from the new loan | Another loan to stack or replace |
| Funding fee | Applies unless exempt | Not a VA product |
| Payments | One loan | Two loans |
The right pick depends on your first loan. Say your current first mortgage is one you would hate to give up. A cash-out replaces it, so you take the new terms whether you like them or not. Keeping it and adding a second lien leaves it untouched. On the other side, a cash-out folds a second lien into one loan and one payment, which many borrowers prefer.
The cash-out wins when the first loan is not worth keeping or when the second lien is a burden. The second-lien route wins when the first loan is worth protecting and you need less cash. Rolling cash into a bigger loan also costs more over the long run, since you pay on a larger balance for longer.
Reading Your Own Number
Nothing here replaces a real appraisal and a real payoff statement. But you can build a rough estimate before you call anyone.
1. Estimate your home’s value.
2. Add up every lien: first, second, HELOC, anything recorded.
3. Subtract that total from the value to see your gross equity.
4. Take off the funding fee if you are not exempt, then your closing costs.
5. Compare what is left against how much cash you need.
If the result looks thin, ask whether a different route fits better, such as a smaller cash-out or leaving the loan alone. VA asks borrowers to understand how the new loan relates to the home’s value. Pulling to full value leaves no cushion if prices dip.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Does a second mortgage or HELOC reduce how much cash I get?
Yes. The new VA loan pays it off, so the payoff comes out of the loan ceiling before any cash reaches you. A larger second lien means less cash.
Can I keep my HELOC and still do a VA cash-out?
Only if the HELOC lender agrees to subordinate, and only if the new loan leaves room. On a cash-out sized near the ceiling, the HELOC is normally paid off instead.
Is the VA cash-out limited to 90% of my home’s value?
No. The current VA ceiling is 100% of reasonable value. Ninety percent is one of the net tangible benefit criteria. Some lenders set their own lower cap, so the figure on your file can differ.
Does the funding fee come out of my cash?
If you finance it, yes, because it counts inside the ceiling. If you are exempt, you skip it. If you pay it at closing, your cash is not reduced, but you bring the money yourself.
Do I need a VA loan already to use the cash-out?
No. A non-VA loan can be refinanced into a VA loan with cash out. You do need a COE and you must live in the home.
Next Step
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’s VA cash-out refinance program page lays out the basics, and every figure above is subject to lender guidelines and full file review. 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 Lenders Handbook, Chapter 6
2. VA.gov: Interest rate reduction refinance loan
3. VA.gov: Cash-out refinance loan
4. VA Loan Guaranty Conference 2023, Refinancing Loans
5. Federal Register, Loan Guaranty cash-out rule
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 Choose a VA Cash-Out Over a Second Lien as a Veteran · How to Get the Most Cash From a VA Cash-Out After Payoff and Costs · VA Cash-Out vs Conventional Cash-Out for a Condo in Litigation
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.