The Quick Read: Every lender that writes a VA cash-out refinance does it without monthly mortgage insurance, because the VA guaranty does the job a bank would otherwise charge for. What differs from lender to lender is the fine print: credit floors, how much of your equity they will reach, and which fees they build in. The one-time VA funding fee replaces the monthly premium, and it can be rolled into the loan. Which lender fits depends on your credit, your equity, and the loan you are paying off.
Key Takeaways
- A VA loan has no monthly mortgage insurance of any kind. The cost shows up instead as a one-time funding fee, waived for exempt veterans.
- The VA cash-out can reach 100% of the appraised value, including the financed fee. Some lenders set a lower cap on their own.
- It refinances any loan type into VA. You must pass a net tangible benefit test.
- Paying off an existing VA loan brings a waiting period before you can refinance it.
- The best lender for your file depends on your credit profile, equity, and the loan you hold today.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your current mortgage with a new VA-guaranteed loan that is larger than what you owe. The difference comes to you as cash. You can use it for repairs, debt payoff, or anything else you choose.
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 loan you pay off does not have to be a VA loan. A homeowner with a conventional loan carrying PMI (private mortgage insurance, the monthly premium on many low-down-payment conventional loans) can move into VA. So can someone with an FHA loan. That conversion is the main reason veterans look at this product.
You also need eligibility. The certificate of eligibility (COE) comes from VA, and VA’s own service rules decide whether you qualify. Lendmire’s VA cash-out refinance program page lays out the program from the borrower’s side.
Why “Which Bank?” Is the Wrong First Question
Here is the straight answer. No bank offers this without monthly PMI as a special feature. The VA guaranty replaces mortgage insurance, so the absence of a monthly premium is built into the program. As the Consumer Financial Protection Bureau explains, a VA-backed loan has no monthly mortgage insurance premium, but you pay an upfront funding fee.
So the real question is which lenders write VA cash-outs, and on what terms. That list is not one you can read off a web page. Plenty of lenders advertise VA loans. Fewer want the cash-out version, and they set their own limits.
- Credit floors. VA sets no minimum credit score, but lenders do. The wholesale programs we place VA loans with start at a 580 decision score. Some lenders set a higher floor.
- Equity reached. VA allows up to 100% of the appraised value. Some lenders stop short of that.
- Property and file types. Some lenders decline certain properties or complicated incomes.
- VA authority. Only lenders with VA automatic authority can close cash-out loans without VA prior approval, per VA’s Lenders Handbook, Chapter 6.
A broker shops several wholesale lenders and matches your file to the one whose rules fit. A single bank gives you one set of overlays. That is the honest tradeoff. A bank or credit union you already use may know you well. A broker can show you more than one answer.
No Monthly PMI Does Not Mean No Cost
“No PMI” is true. “No insurance cost” is not.
The funding fee is a one-time charge that stands in for monthly insurance. On a VA cash-out refinance, the fee is 2.15% of the loan for first use and 3.3% for later use. Veterans receiving compensation for a service-connected disability, and the other exempt groups, do not pay it. Confirm your exemption status on your COE.
You can pay the fee at closing or roll it into the loan. Rolling it in keeps cash in your pocket today. But the CFPB notes that it raises both the loan amount and your overall cost. On a cash-out, it also uses up part of your equity, so you receive less cash.
Here is how the three costs compare:
| Cost | When you pay it | Applies to VA cash-out? |
|---|---|---|
| Monthly mortgage insurance | Every month | No |
| VA funding fee | One time, financeable | Yes, unless exempt |
| Standard closing costs | At closing | Yes |
Closing costs and the appraisal sit under the same ceiling as everything else. Your Loan Estimate and Closing Disclosure show each line, and you should compare them across offers.
How the Loan Is Underwritten, Step by Step
Here is the order a lender works through.
1. Eligibility. The certificate of eligibility (COE) from VA decides whether you qualify. Service requirements are VA’s rules, and the lender confirms the COE before anything else moves.
2. Occupancy. This is a loan on the home you live in. It is not a vehicle for a rental.
3. What you are paying off. VA’s cash-out Quick Reference splits cash-outs in two. Type 1 is when the new loan is at or below 100% of the payoff of the loan being refinanced. Type 2 is when the new loan exceeds the payoff. Most borrowers reading this want Type 2, because that is the one that puts cash in hand.
4. Seasoning, if it applies. If you are paying off an existing VA loan, VA requires seasoning certification. In practice, that means the later of 210 days from your first payment and your sixth payment. It does not apply the same way when you are paying off an FHA, USDA, or conventional loan, though a lender may add its own waiting period.
5. Net tangible benefit. The next section covers this test in plain words. The new loan must meet at least one of VA’s listed benefits.
6. Appraisal. VA’s cap is tied to the reasonable value of the home as the Secretary of Veterans Affairs determines it. The VA appraisal sets that value. It also sets the ceiling on what you can borrow.
7. Full underwriting. The lender reviews credit, income, and residual income. Residual income is the money left each month after your major obligations and living costs. It is the controlling test on a VA loan. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
8. Closing. The lender issues the loan and reports it to VA under VA procedures.
Four things decide the outcome: the appraised value against your payoff, whether the funding fee fits inside the cap, whether you pass the net tangible benefit test, and the lender’s own overlays.
The Net Tangible Benefit Test, in Plain Words
The loan has to leave you better off, and the rules make the lender prove it. Under 38 CFR 36.4306, the new loan cannot exceed 100% of reasonable value. The lender must also show that the loan passes the net tangible benefit test, and the file cannot close until it does.
VA lists eight qualifying benefits. You need to meet one. Three of them are shown here.
- The new loan eliminates monthly mortgage insurance, public or private. This is why borrowers leaving FHA or conventional-with-PMI usually pass.
- An adjustable-rate loan becomes a fixed-rate loan. The Federal Register notice explains that VA treats a stable payment as a financial benefit.
- The loan stays at or below 90% of value. VA built that 90% loan-to-value criterion into the test.
The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL, VA’s streamline refinance. They do not apply to the cash-out.
Where the General Rule Breaks
The basic story is simple. These edge cases are where files get stuck.
VA payoff versus non-VA payoff. Seasoning applies when you are paying off a VA loan. Paying off FHA, USDA, or conventional avoids that certification, but you still need the net tangible benefit.
Loans near 100% of value. The 100% ceiling is real, but a loan above 90% of value cannot rely on the 90% criterion. It has to meet a different benefit, such as eliminating monthly mortgage insurance or moving from an adjustable rate to a fixed rate. A borrower leaving a conventional loan that has no PMI loses the insurance benefit as well, so that file needs another qualifying benefit.
Lender caps below 100%. The program allows 100% of the appraised value, including the financed fee. Some lenders stop lower. If a bank tells you 90%, that is the bank’s rule, not VA’s.
Financing the fee. Because the fee counts inside the cap, financing it shrinks the cash you receive. A borrower who wants every dollar of equity should ask whether they are exempt before assuming the fee applies.
Lender authority and appetite. A lender without VA automatic authority cannot close these on its own. Even those with authority may pass on a file.
Another program. FHA and USDA loans carry their own mortgage insurance, per the CFPB. Conventional PMI is paid monthly. Only VA removes it from the monthly budget entirely.
VA Cash-Out vs. the Alternatives
| Option | Replaces your mortgage? | Monthly mortgage insurance? |
|---|---|---|
| VA cash-out refinance | Yes | None |
| VA IRRRL (streamline) | Yes, VA loans only | None |
| Conventional cash-out | Yes | Often, at high leverage |
| Home equity loan or HELOC | No, a second loan | Not applicable |
The IRRRL has no VA appraisal and a 0.5% fee unless exempt, but it gives you no cash. A home equity loan leaves your first mortgage alone. That can be smart if your current loan is one you want to keep. A cash-out replaces everything, which brings us to the real risks.
The Risks Nobody Puts in the Brochure
- You spend equity. Cash you take out is equity you no longer have.
- Your balance grows. Rolling in the funding fee adds to it.
- You give up your current loan terms. If your existing loan has features you value, replacing it costs you those.
- Closing costs apply. They come out of the same pool as your cash.
A cash-out makes sense when the cash buys something with a clear return, or when moving out of monthly mortgage insurance changes your budget. It makes less sense for spending you could avoid.
How to Find a Lender That Fits
Ask each lender the same questions:
1. Do you hold VA automatic authority for cash-outs? 2. What is your maximum loan-to-value on a cash-out? Is it 100% or lower? 3. What credit floor do you use? 4. Do you add a seasoning wait on non-VA payoffs? 5. Is the funding fee financed inside your cap? 6. Which property types and income types do you decline?
If one says no, that tells you about its overlays, not about your eligibility. A broker can take the same file to wholesale lenders. The lenders that write this depend on your credit, equity, and the loan you are paying off.
A Worked Picture
Say a veteran holds a conventional loan with PMI. The home has built equity. The veteran wants cash for repairs and wants the monthly premium gone.
The veteran gets a COE and applies. The lender orders a VA appraisal. Because the old loan is conventional, no VA seasoning certification applies. Eliminating monthly mortgage insurance satisfies the net tangible benefit. The lender runs the residual income test. If the appraised value and the lender’s cap allow it, the new loan pays off the old one, covers the funding fee if financed, and sends the rest as cash.
Change one input and the picture shifts. A lender capped at 90% sends less cash. An exempt veteran owes no funding fee, so keeps more equity.
Key Terms Defined
Funding fee: A one-time VA charge, paid at closing or financed, that takes the place of monthly mortgage insurance.
Net tangible benefit: A test showing the new loan puts you in a better financial position under one of VA’s listed criteria.
Seasoning: The waiting period between your first payments on a VA loan and when you can refinance it.
Residual income: What remains each month after major obligations and living costs. It is VA’s controlling underwriting test.
Certificate of eligibility (COE): The VA document that confirms your service eligibility and fee exemption status.
Entitlement: The amount of guaranty VA backs for you.
Frequently Asked Questions
Do I need a bank, or can a mortgage broker help with a VA cash-out?
A broker can arrange it. Lendmire is a mortgage broker licensed for consumer lending in 16 states. It shops wholesale lenders and matches your file to the program, but never lends directly. Compensation is disclosed on your Loan Estimate, and you should compare full terms across offers.
Can I convert a conventional loan with PMI into a VA loan?
Yes, if you are eligible. A VA cash-out refinances any loan type into VA. Eliminating the monthly insurance counts toward the net tangible benefit test, so these files often pass it. Subject to lender guidelines and full file review.
Is there a minimum credit score?
VA sets none. Lenders do. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders require more, so one lender’s no is not final.
Can I borrow 100% of my home’s value?
The VA ceiling is 100% of appraised value, including the financed funding fee. Some lenders cap lower. A loan above 90% must pass a net tangible benefit criterion other than the 90% one.
Is the funding fee ever waived?
Yes. Veterans receiving compensation for a service-connected disability, and other exempt groups, do not pay it. Check your COE for your status.
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.
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. Consumer Financial Protection Bureau: What is mortgage insurance and how does it work
2. VA Lenders Handbook, Chapter 6: Refinancing Loans
3. VA cash-out refinance Quick Reference
5. Federal Register: Revisions to VA-Guaranteed or Insured Cash-Out Home Refinance Loans
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 Cash Comes Out of a VA Cash-Out Refinance to Go Fixed? · How Lenders Underwrite a VA Cash-Out Refinance for Veterans
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.