The Quick Read: A VA cash-out refinance replaces your whole mortgage and can reach up to 100% of the appraised value, financed funding fee included. A second lien leaves your first loan alone and lends only what a separate lender’s own cap allows on top of it. Cash in your pocket is what remains after payoffs, the fee and closing costs. VA does not make a home equity loan or HELOC of its own, so the real choice is replace versus add.
Key Takeaways
- The VA cash-out has the higher ceiling, but it puts the entire balance on new terms.
- A second lien keeps your current first loan, but it adds a second obligation and a lower lending cap.
- The funding fee applies to the whole new loan, not just the cash you take out.
- The size of your cash need, set against your current balance, decides which route leaves more in your pocket.
- Everything below is subject to lender guidelines and full file review. None of it is a commitment to lend.
Is There a VA Home Equity Loan or HELOC?
No. VA’s equity product is the cash-out refinance. A home equity loan or HELOC (a home equity line of credit, a revolving line you draw from as needed) is a private second lien that a bank or credit union sells on its own terms.
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.
VA explains that a VA-backed cash-out replaces your current loan with a new one under different terms. It can take cash from your equity. It can also move a non-VA loan into a VA-backed loan. A private lender makes the loan, and VA guarantees part of it. VA is not the one handing you the money.
Many veterans assume a “VA HELOC” exists because the VA name is on everything else. It does not. When someone offers you one, slow down and read the paperwork. VA itself warns borrowers to be careful with refinance offers.
Replace Versus Add: The Core Difference
Here is the whole idea in one picture. A cash-out is one new first mortgage that pays off the old one, plus whatever cash you take. A second lien is a second loan stacked behind the first one you already have.
“Second” has a plain meaning. If the home is ever sold to pay debts, the second lender is paid after the first. That sits at the root of the lending caps. A lender in second position carries more risk, so it sets its own limit, and that limit usually sits below what the first-lien route allows.
For the program basics, see Lendmire’s VA cash-out refinance program page. Here are the mechanics that decide “how much.”
| Factor | VA Cash-Out | Second Lien |
|---|---|---|
| Position | New first lien | Behind your first |
| Your current loan | Paid off and replaced | Stays as is |
| Lending ceiling | Up to 100% of appraised value, fee included | Lender’s own combined cap |
| Number of payments | One | Two |
| Fee structure | Funding fee unless exempt | Second lender’s costs |
| Underwriting | Full, residual income | Separate, at a different lender |
How Much You Actually Net: The Step-by-Step
The headline percentage is a ceiling. It is not what lands in your account. Work it in this order.
1. Eligibility. You need a certificate of eligibility (COE). VA decides it, and service requirements are VA’s rules.
2. Appraisal. A cash-out needs a VA appraisal. The appraised value is the denominator for everything that follows.
3. Ceiling. Take the appraised value and apply the program’s limit. For a VA cash-out, the new loan can reach 100% of that value, including the financed funding fee.
4. Payoff. Subtract every lien the new loan has to retire. That is your current first mortgage and any second you choose to pay off.
5. Funding fee. This is a percentage of the new loan. It can be financed, which means it sits inside the ceiling and shrinks your cash.
6. Closing costs. These also come out of the room under the ceiling if you roll them in.
7. What is left is your cash.
On a VA cash-out refinance, the funding fee is 2.15% on a first use and 3.3% on later uses. Veterans receiving compensation for a service-connected disability are exempt, along with a few other groups. The VA funding fee page explains how the fee works. The fee is a one-time payment due at closing.
Worked Example One: Big Cash Need
Run it with percentages of value. Say your home appraises at 100 units, and your current first loan sits at 50% of that value. You are on a first use, so the fee is 2.15%.
- Ceiling: the new loan can reach 100% of value, fee included.
- Fee effect: with the fee financed, the base loan before the fee comes to just under 98% of value.
- Payoff: subtract the 50% first loan.
- Cash: roughly 48% of value, before other closing costs come out.
On a later use, with the 3.3% fee, the base loan before the fee comes to about 97% of value. Cash shrinks accordingly. A lender may also set a cap below VA’s ceiling, so your actual figure can come in lower.
Now compare the second lien. The second lender looks at the same home and the same 50% first loan, and applies its own combined limit. That limit sits below 100%. Your cash is whatever room sits between the first loan and that cap. Same home, less room.
What the Second Lien Does Differently
A second mortgage is a loan secured by your house while another loan is already secured by it. Home equity loans and HELOCs are the common kinds. The CFPB notes that second lenders may not be paid in full if equity runs short, so second mortgages often carry higher rates than first mortgages.
The two common versions work like this:
- Home equity loan. A lump sum, with a rate that may be fixed or adjustable.
- HELOC. A revolving line, usually with an adjustable rate, so the payment moves with your balance.
Both add a payment on top of your first. A HELOC also has a quirk. The money you counted on may not be there when you need it.
The second lender underwrites you separately. Your first lender has no say, and your VA entitlement is not part of the picture. Your first loan keeps its terms, and that matters for the next section.
When a Low First Loan Changes the Answer
Here the real decision often comes into focus. Say your current first mortgage has terms you like. A cash-out resets everything. Your entire balance moves onto today’s terms, not just the cash you take.
Two things follow:
- The funding fee applies to the whole new loan. It does not apply only to the cash.
- Whatever favorable terms your old loan carried disappear when it is paid off.
Worked Example Two: Small Cash Need
Take the same home at 100 units of value. This time your first loan sits at 60% of value, and you want about 5% of value in cash.
On the cash-out route, the new base loan lands near 65% of value. A 2.15% fee on that comes to roughly 1.4% of value. That is over a quarter of the cash you came for, and it is before other closing costs. Meanwhile your whole 60% balance moves to new terms.
On the second lien route, your first loan stays untouched. The second lender’s costs apply to a small loan of about 5% of value. You carry two payments, but you give up nothing on the first loan.
At small amounts, the second lien often wins on cost. As the cash need grows, the math turns. The fee spreads over more cash, and the second lender’s cap starts to pinch. Somewhere in the middle is your break-even. It depends on your balance, your appraisal and your lender’s cap, so run both with real quotes.
The one case where the second lien cannot help is a non-VA first loan you want out of. A cash-out can move a conventional, FHA or USDA loan into VA. A second lien cannot change your first loan’s terms at all.
Existing Second Liens and Payoff Order
If you already have a second lien, you have two options under a cash-out.
Pay it off. The new loan can refinance any type of lien, according to the VA Lenders Handbook, Chapter 6. That includes a HELOC or home equity loan. The payoff comes out of your available room, so it reduces your cash.
Leave it and subordinate it. The new VA loan must be in first-lien position. The second lienholder has to agree to move behind it. They are not obligated to agree, and a decline in your home’s value makes agreement harder. Copies of any subordination agreements go in the loan file.
An IRRRL is a different animal. It is VA’s streamlined refinance for an existing VA loan. It refinances only that VA loan, so it cannot retire a HELOC or pull cash. A second lien in place must subordinate for it to proceed.
Lendmire’s piece How Much a Second Lien Limits a First-Time VA Cash-Out Draw walks through the first-use case in more detail.
Underwriting: What the Lender Checks
A cash-out is a full underwriting, not a streamline. Expect the lender to review your credit, your income and your residual income. Residual income is what is left of your monthly income after debts and household costs, and it is the controlling test on VA loans. VA sets no minimum credit score. The wholesale programs Lendmire places VA loans with start at a 580 decision score.
The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above VA’s table. VA’s underwriting standards, including residual income, sit in 38 CFR Part 36.
Two more checks belong to the refinance itself:
- Seasoning. The later of 210 days from the first payment on the loan being refinanced and the sixth payment.
- Net tangible benefit. The refinance has to deliver one of the benefits VA lists. 38 CFR 36.4306 covers refinance rules, including this test.
The half-percent rate-reduction test and the fee-recoupment test are IRRRL rules. They do not apply to a VA cash-out. Lenders can also set tighter standards than VA, so one lender’s floor or cap may differ from another’s.
Where the General Rule Breaks
The “up to 100%” headline has several soft spots.
- Appraisal shortfall. The ceiling is a percentage of value. A lower appraisal shrinks everything, and the payoff and fee stay the same. Your cash takes the hit.
- Lender caps. Some lenders set a lower ceiling than VA. The program permits 100%, but your file may not reach it.
- Entitlement. Entitlement is the amount VA guarantees. Total guaranty on a refinance ties to the entitlement used on the loan being refinanced plus any additional entitlement available. On a larger loan with less than full entitlement, speak with a loan officer, because a down payment may come into play.
- Existing solar lien. A solar financing lien changes the payoff and subordination picture. Lendmire’s article How Much a VA Cash-Out Lends When the Home Has a Solar Lien covers it.
- Occupancy. Treat the cash-out as a tool for the home you live in. You must own the property.
- Equity is not the measure. “VA lends 100% of your equity” is a misconception. The ceiling is a percentage of value, and payoffs and the fee come out first.
If your title question was about a rental or second home, the one-line answer is that occupancy decides the leverage. This article is about the home you live in.
Honestly, the appraisal is the swing factor that borrowers underestimate. A home that appraises a few points low can erase the cash the whole refinance was built around.
Which Route Fits Which Goal
| Your situation | Likely better fit |
|---|---|
| Large cash need, modest first loan | VA cash-out |
| Small cash need, first loan terms you like | Second lien |
| Want to leave a non-VA loan | VA cash-out |
| Need flexible draws over time | HELOC |
| Want one payment | VA cash-out |
| Existing second lien that will not subordinate | VA cash-out (pay it off) |
CFPB says that, depending on terms, a cash-out refinance may be more or less expensive than a HELOC. So no single route is always cheaper. Use the table as a starting point. Then compare quotes side by side.
Both routes carry risk. If you cannot repay a home equity loan or HELOC, you could lose your home. A cash-out has the same exposure, since it is also secured by your house. Using equity to pay other debts means taking one loan to repay another. A cash-out also affects future refinancing, and a second lien complicates a later refinance of the first.
Key Terms Defined
Cash-out refinance: A new mortgage that pays off your current one and gives you the leftover equity in cash.
Second lien: A loan secured by your home behind your first mortgage, repaid second if the home is sold.
Funding fee: A one-time VA fee, due at closing, that can be financed and is waived for exempt veterans.
Residual income: The money left each month after debts and household costs, which VA treats as the controlling test.
Subordination: A written agreement where a lienholder agrees to sit behind the new first loan.
Entitlement: The amount VA guarantees on your loan, which can limit loan size when it is only partly available.
Where to Go From Here
Start by collecting three numbers: your current payoff, a realistic value for the home and the cash you need. Those three decide most of the answer. 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
Does VA offer a home equity loan or HELOC?
No. VA’s equity product is the cash-out refinance, which replaces your current mortgage. Home equity loans and HELOCs are private second liens from banks and credit unions. VA does not make them, and a VA guarantee does not apply to them.
Can a VA cash-out pay off my existing second lien?
Yes. A VA cash-out can refinance any type of lien, so a HELOC or home equity loan can be retired in the new loan. The payoff reduces your cash. If you keep the second instead, the lienholder must agree to subordinate to the new first loan.
Does the funding fee reduce what I receive?
Yes, when you finance it. The fee sits inside the 100% ceiling, so every point of fee is a point less cash. On a first use it is 2.15%, and on later uses 3.3%. Veterans receiving compensation for a service-connected disability are exempt.
Can I keep my current first mortgage and still get VA money?
Not through a cash-out, because a cash-out replaces your first loan. If you want to keep it, a second lien from a private lender is the path. The first loan keeps its terms, and you take on a second payment.
Will every lender let me reach 100% of value?
Not necessarily. The program permits up to 100% of appraised value including the financed fee. Individual lenders can set a lower cap or a higher credit floor. Your appraisal, credit, residual income and entitlement all affect the result.
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
1. VA – Cash-out refinance loan
2. VA – Funding fee and closing costs
3. CFPB
4. VA Lenders Handbook, Chapter 6
7. 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: Does a Second Lien Cost Less Than a VA Cash-Out on an Existing VA Loan? · Should a Veteran Ever Pick a VA Cash-Out Over a Second Lien? · How a VA Cash-Out Pays Off a Second Lien at Closing · VA Cash-Out Refinance Criteria for Choosing Over a Second Lien · How a VA Cash-Out Replaces the First Loan Instead of a Second Lien
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.