The Quick Read: An eligible surviving spouse usually pays nothing. The VA funding fee is waived when the veteran died in service or from a service-connected disability, and that waiver covers a cash-out refinance. A spouse who does not meet that test pays the standard fee, which is 2.15% of the new loan for a first-time VA user and 3.3% after that. Whether you are exempt turns on VA’s determination, not on a lender’s judgment.
What Is the VA Funding Fee, Exactly?
The funding fee is a one-time charge paid to VA, not to a lender or broker. It helps keep the VA loan program running without monthly mortgage insurance. On a cash-out refinance, it is a percentage of the entire new loan balance, not of the cash you take out. That makes it one of the largest single closing items for a borrower who owes it.
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 fee is also not a lender fee you can negotiate. It is set by rule and sent to VA. Under 38 CFR § 36.4313, the lender must remit it to VA after closing, on a timeline set by the rule. The same rule says you can pay it in cash or include it in the loan.
Across the wholesale programs Lendmire places VA files with, the fee is financeable. Financing it raises your loan balance. Exemption removes the line entirely, so there is nothing to finance.
Who Pays and Who Doesn’t
Not every surviving spouse is exempt. The waiver is tied to the veteran’s death, not to the marriage itself. Under federal law, the funding fee may not be collected from the surviving spouse of a veteran who died from a service-connected disability. The text expressly includes a person who died in active service.
In practice, the common marker is Dependency and Indemnity Compensation, or DIC. That is a monthly VA benefit paid to certain survivors. Lenders generally look for proof of it. Treat DIC as the usual practical test, and confirm your own status with VA.
| Your situation | Funding fee on a cash-out |
|---|---|
| Spouse of a veteran who died in service | Waived |
| Spouse of a veteran who died of a service-connected disability | Waived |
| Spouse receiving DIC | Generally waived, confirmed by VA |
| Spouse who is only a co-borrower, no DIC | Not automatically exempt |
| Spouse whose DIC is pending or denied | Treat as non-exempt until VA says otherwise |
| Spouse of a missing-in-action or prisoner-of-war service member | Ask VA directly |
The last row is a real gray area. Guides disagree on it, and the primary sources reviewed here do not settle it. Do not assume either way.
What a Non-Exempt Spouse Pays
If you do not qualify for the waiver, the cash-out fee follows VA’s published table. VA Circular 26-23-06, Exhibit B lists the cash-out refinance fee at 2.15% for first use and 3.3% for subsequent use. The same table lists a separate, lower fee of 0.5% for the IRRRL, which is VA’s streamlined refinance for an existing VA loan.
The reduced tiers you may have heard about for larger down payments do not apply to refinances. A VA cash-out can reach 100% of the appraised value, including the financed fee. But putting more equity in does not lower the cash-out fee. That is a common mix-up.
The circular is dated, so check VA’s current funding fee page before you rely on any figure. Program figures are subject to lender guidelines and full file review.
How the Exempt and Non-Exempt Loans Compare
Picture two spouses with identical homes and identical goals. Both want a VA cash-out refinance at 90% of the appraised value.
The exempt spouse has a $0 fee line. The new loan is exactly the balance needed to pay off the old mortgage, cover closing costs and deliver the cash.
The non-exempt spouse has a fee of 2.15% of the new loan if this is a first VA use. If they finance it, the fee is added to the balance. That raises the loan amount and the monthly payment.
It also uses up some of the borrowable equity, because the financed fee counts toward the loan amount. A VA cash-out can reach 100% of the appraised value including the financed fee, so a 90% request leaves room for it, but the fee still takes part of that room. The rule at 38 CFR § 36.4313 lets the fee be included in the loan, and the lender disregards the financed fee amount when computing the fee itself. Even so, every financed dollar is a dollar you owe and pay interest on. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
For the exempt spouse, more of the equity goes toward the purpose of the cash-out. Home repairs, debt payoff or a cushion all get a bigger share.
How a Surviving Spouse Claims the Exemption
Here is the sequence, in order. The earlier you start, the fewer surprises at closing.
1. Get your own certificate of eligibility. VA must issue a certificate of eligibility, or COE, in the surviving spouse’s name. Under 38 CFR Part 36, that certificate is a condition of the VA guaranty. The COE is the document that decides your standing.
2. Check the funding fee status on the COE. It generally shows whether you are exempt, non-exempt, or need to contact VA. The lender relies on that status.
3. Gather proof of DIC. If DIC is what establishes your exemption, have the award letter ready. If your DIC claim is still pending, tell the loan officer at the start.
4. Settle status before closing. VA’s General Counsel has said in Precedent Opinion 2-2019 that the fee amount is set by the closing date, and lenders collect it at closing. That opinion addressed veterans whose compensation award came later, but the logic carries over. Do not count on fixing it afterward.
5. Read the fee line on your paperwork. On the Loan Estimate and the Closing Disclosure, the VA funding fee should show as $0 if you are exempt. If a fee appears, stop and ask why.
When VA waives the fee, it does not just disappear from the books. The statute has VA credit its Guaranty and Indemnity Fund with an amount equal to the waived fee. You are not charged, and the program is made whole.
Where the General Rule Breaks
A few situations catch people off guard.
The co-borrower spouse. Being on the original VA loan does not make you exempt. A spouse who is simply a co-borrower, and who does not receive DIC, is not automatically waived.
DIC pending or denied. If VA has not yet decided, you do not have a confirmed exemption. A quote built on the wrong status can include a fee that later changes, or omit a fee that later appears.
Remarriage. Remarriage rules affect eligibility itself, not the fee. The specifics are VA’s to confirm, so ask VA before you plan around it.
A veteran who died of an unrelated cause. A veteran may have been rated permanent and total yet died of something unrelated to service. That does not automatically produce the waiver. The statute turns on a service-connected cause of death or death in service. Ask VA how your case is classified.
Refunds. If exempt status was established late, a refund may be possible. No primary source reviewed here lays out the procedure. Ask the lender and VA.
The net tangible benefit. The VA cash-out refinance carries a net tangible benefit requirement, meaning the loan has to meet one of VA’s listed benefits for you. The half-percent rate-reduction and fee-recoupment tests are IRRRL rules and do not apply to the cash-out.
Cash-Out or Streamline for a Surviving Spouse?
If you are exempt, the fee does not decide this. It is $0 on both.
For a non-exempt borrower, the IRRRL fee of 0.5% looks far smaller than the 2.15% or 3.3% on a cash-out. But the two loans do different jobs. The IRRRL only works on an existing VA loan, and it is meant to lower the rate or move from an adjustable loan to a fixed one. It involves no VA appraisal and no cash out.
The cash-out is for taking equity, or for moving a non-VA mortgage into a VA loan. Choose on the purpose of the loan, not the fee. Both carry seasoning, which is the waiting period after your current loan starts: the later of 210 days from the first payment and the sixth payment.
What a Surviving Spouse Also Needs to Qualify
Exemption fixes only the fee. The loan still has to work for you.
Across the wholesale programs Lendmire places VA files with, the common floor is a 580 decision score. VA itself sets no minimum credit score. Lenders add their own, and some set a higher floor.
Residual income is the controlling test. That is the money left each month after your debts, taxes and basic living costs. The 41% debt-to-income figure is a guideline rather than a cap. A ratio above it needs residual income well above VA’s table.
For a spouse living on survivor benefits and perhaps a single income, residual income deserves a careful look. Ask the loan officer to walk through it before you apply.
Exempt does not mean no closing costs. Only the VA fee is waived. Appraisal, title and recording costs remain.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Funding fee: A one-time charge on a VA loan, paid to VA, calculated as a percentage of the loan.
Certificate of eligibility (COE): The VA document that confirms you qualify for a VA loan and shows your funding fee status.
Dependency and Indemnity Compensation (DIC): A monthly VA benefit paid to certain survivors, and the usual proof used to establish a spouse’s exemption.
Financed fee: A funding fee added to the loan balance instead of paid in cash at closing.
Seasoning: The waiting period a loan must age before it can be refinanced.
IRRRL: VA’s streamline refinance for an existing VA loan, with a 0.5% fee unless exempt.
Frequently Asked Questions
Does a surviving spouse pay the VA funding fee on a cash-out refinance?
Usually not. If VA confirms you are an exempt surviving spouse, the fee is $0 on a cash-out, an IRRRL or any other VA loan type. If you do not meet the test, the cash-out fee is 2.15% for first use and 3.3% after that.
Can the funding fee be financed?
Yes. A non-exempt borrower can pay it in cash or include it in the loan. Financing raises your loan balance and monthly payment. A VA cash-out can reach 100% of the appraised value including the financed fee, subject to lender guidelines.
Does remarriage change the funding fee?
Remarriage affects eligibility, not the fee itself. The details are VA’s to decide, so ask VA before you plan around it. A confirmed COE is the document that settles it.
What if my exemption is confirmed after closing?
A refund may be possible, but no primary source reviewed here sets out the procedure. Ask the lender and VA as early as you can. The better path is settling status before closing, since the fee is set by the closing date.
Is the funding fee tax deductible?
Tax treatment can depend on your situation. Speak with a qualified tax professional before relying on any deduction.
Your Next Step
Start with your certificate of eligibility and the fee line on it. If it shows exempt, the cash-out refinance carries no VA funding fee, and your equity goes further. If it says non-exempt or “contact VA,” sort that out first.
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 covers how the loan is structured. 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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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
2. VA Circular 26-23-06, Exhibit B
4. VA General Counsel Precedent Opinion 2-2019
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 Lends After the Funding Fee Hits the Cap · How Much Cash Comes Out of a VA Cash-Out Refinance After Delisting?
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
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.