The Quick Read: A first-time VA user pays a funding fee of 2.15% of the loan on a VA cash-out refinance. After first use, the cash-out fee is 3.3%. The fee is one-time, goes to VA rather than the lender, can be financed into the loan, and is waived for exempt veterans, subject to lender guidelines and full file review.
Three questions drive the funding fee on a cash-out: which tier applies, what the fee is charged on, and what financing it does to the cash you walk away with. This article covers each, plus the edge cases that change the answer.
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.
What Is the VA Funding Fee on a Cash-Out?
The funding fee is a one-time charge paid to VA on VA-guaranteed loans. VA News describes it as a one-time payment on loans used to buy, build, improve or repair a home, or to refinance a mortgage. It is not mortgage insurance. VA loans carry no monthly mortgage insurance, and the fee is not a lender charge.
The VA Lenders Handbook, Chapter 8 says that unless exempt, each veteran must pay the fee, and the loan amount may include it. The fee varies by loan type: purchase or construction, the VA streamline refinance, or cash-out refinance.
Key Terms Defined
- Funding fee: A one-time fee paid to VA on a VA-guaranteed loan, unless the borrower is exempt.
- First use: The first time a borrower uses the VA home loan benefit, which sets the lower cash-out tier.
- Subsequent use: Any later use of the benefit, which carries the higher cash-out tier.
- Certificate of eligibility (COE): The VA document that confirms eligibility and shows entitlement.
- Exempt borrower: A borrower VA excuses from the fee, such as a veteran receiving service-connected disability compensation.
- Net tangible benefit: A VA test a refinance must meet, such as a real improvement for the borrower.
What Does a First-Time User Pay?
On a VA cash-out refinance, the first-use fee is 2.15%. After first use it is 3.3%. VA News lists the same figures and notes that refinance rates vary, so borrowers should check the VA funding fee and closing costs page for their own rate.
| Situation | Cash-out fee |
|---|---|
| First use | 2.15% |
| Subsequent use | 3.3% |
| Exempt borrower | Waived |
A purchase works differently: first use runs 2.15% with less than five percent down, 1.5% with five to under ten percent down, and 1.25% with ten percent or more down. A cash-out does not step down. Equity in the home does not lower the fee. Only your benefit-use history and exemption status change it.
The VA streamline refinance is the third schedule. It carries a 0.5% fee unless exempt. A cash-out uses the larger schedule because it can pull equity and refinance any loan type into VA. For the program basics, see Lendmire’s VA cash-out refinance program page.
What Is the Fee Charged On?
The percentage applies to the new loan amount, not just the cash you take out. On a purchase, the fee base is the loan after any down payment. On a cash-out, the new loan pays off the old mortgage and delivers cash, so the fee base is the whole new balance. That makes the fee larger in dollars than a quick read of “2.15% of my cash” would suggest.
Run it as a percentage example. Say a homeowner’s new loan equals 90% of the home’s appraised value. The first-use fee is 2.15% of that whole loan, not 2.15% of the equity pulled, so the fee is charged on the 90% figure in full. Confirm the exact base before relying on it, because the lender’s Loan Estimate shows the figure for your file.
Can You Finance the Fee?
Yes. Chapter 8 of the Handbook says that on cash-out loans, allowable fees may be paid from the cash proceeds, and only the funding fee and the cost of energy efficiency improvements can be added to increase the loan amount. The fee is the one closing cost that can raise the balance.
The VA cash-out refinance has a practical limit: the loan can reach 100% of the appraised value, and that ceiling includes the financed fee. If the home’s value is near the ceiling, a financed fee uses up part of the room you would otherwise have for cash. Which route fits depends on how much cash you need and how much you want the balance to grow.
Financing the fee raises the loan balance and the monthly principal and interest slightly. It is a one-time charge, not a monthly one.
How Net Cash Gets Reduced
Walk the file in order:
1. Appraised value. VA requires an appraisal to set reasonable value on a cash-out.
2. Maximum loan. The cap is 100% of the appraised value, including the financed fee.
3. Payoff. The new loan first pays off the existing mortgage, any liens and allowable costs.
4. Funding fee. 2.15% of the loan for a first-time user, financed or paid in cash.
5. Cash to you. What remains after the payoff and the other items above.
Because the fee sits inside the cap, a financed fee shrinks your available cash one-for-one against the ceiling.
Where the General Rule Breaks
Exemptions. The exemption groups are not specific to cash-outs. They apply to every VA loan type. They include veterans receiving compensation for a service-connected disability, veterans eligible for compensation who receive retirement or active-duty pay, surviving spouses receiving DIC, and service members with a proposed or memorandum rating before closing. Purple Heart recipients are also exempt. The Handbook lists the groups. An exemption removes only the fee. Eligibility and underwriting stay the same.
Status verification. The lender must verify exempt status before closing. If the paperwork is missing, the fee may be charged anyway. Chapter 8 says VA will determine the borrower’s status and refund the fee if appropriate. A disability award granted later with an effective date before closing may support a refund. Raise this with your loan officer early if a rating claim is pending.
“First use” can be tricky. Restoring entitlement does not necessarily reset the tier. A borrower who used the benefit years ago, paid the loan off and restored entitlement may still be treated as subsequent use. There are reported exceptions, such as a prior use limited to a manufactured-home loan. Check your COE and the VA funding fee page before assuming the 2.15% tier. Borrowers can easily overlook this point.
Non-VA loan into VA. A cash-out refinance can move any existing loan type into VA. The fee schedule is the cash-out schedule, not the IRRRL’s 0.5%, because the loan is not a rate-and-term streamline of an existing VA loan.
Reserve and Guard. VA News lists the same rates for veterans, active-duty members, and National Guard and Reserve members.
What Else Applies to a VA Cash-Out?
The fee is only one piece. A VA cash-out also carries seasoning and a net tangible benefit, which must be one of VA’s eight listed benefits. The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL, not the cash-out. Underwriting is full: income and credit review, with residual income as the controlling test. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table. VA sets no minimum credit score, and the wholesale programs Lendmire places VA loans with start at a 580 decision score. The home must be owner-occupied. All of this is subject to lender guidelines and full file review.
Common Mistakes
- Assuming 3.3% applies to everyone. That is the subsequent-use rate. A true first-time user pays 2.15%.
- Expecting a down payment or equity to lower it. That works on a purchase, not a cash-out.
- Treating it as mortgage insurance. It is a one-time fee paid to VA.
- Assuming any closing cost can be rolled in. Only the funding fee and energy improvements can increase the loan amount.
- Assuming only disabled veterans are exempt. Purple Heart recipients and DIC surviving spouses are also exempt.
- Skipping the exemption check. An unverified exemption means the fee may still be charged.
What the Decision Looks Like in Practice
Start with your COE. It shows your benefit history and entitlement, and it settles whether you are first use. Next, confirm any exemption in writing. Then decide whether to finance the fee or pay it. Last, check the result against your goal.
The fee does not vary by lender. VA sets it, so there is nothing to shop on that line. What differs between lenders is everything around it. The Loan Estimate and Closing Disclosure show the fee itemized, so check that line against the tier you expect.
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.
Frequently Asked Questions
Is the funding fee different if I use the VA loan for the first time on a cash-out?
The first-use cash-out fee is 2.15%, lower than the 3.3% charged after first use. It does not drop with equity or a down payment the way a purchase fee does. An exempt borrower pays nothing.
Do I pay the fee at closing, or can it be added to the loan?
Either. The fee is the one closing cost that can be added to increase the loan amount on a cash-out. Financing it raises the balance but keeps cash on hand. Paying it in cash keeps the balance lower.
Does the fee apply to the cash I take out or the whole loan?
It applies to the whole new loan, which includes the payoff of the old mortgage. That makes the dollar amount larger than a percentage of the cash alone. Check the Loan Estimate for your file’s figure.
Can I get the fee refunded if my disability rating comes through later?
Possibly. An award with an effective date before closing may support a refund. Tell your loan officer about any pending claim early.
Is a streamline refinance cheaper than a cash-out?
The IRRRL carries a 0.5% fee unless exempt, versus 2.15% for a first-use cash-out. But the IRRRL refinances an existing VA loan and does not pull equity. They solve different problems.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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 News
2. VA Lenders Handbook, Chapter 8
3. VA.gov – Funding fee and closing costs
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 Much a VA Cash-Out Can Pay a Spouse in a Divorce Buyout · How Much a Second Appraisal Adds to a First-Time VA Cash-Out · How to Challenge a Low Appraisal on a First-Time VA Cash-Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.