The Quick Read: The VA caps a cash-out refinance at 100% of the home’s reasonable value, as set by the VA appraisal. The financed funding fee counts inside that cap, so it cannot stack on top of full value. Whatever is left after paying off your existing liens, the fee, and closing costs is the cash that reaches you, subject to lender guidelines and full file review.
Those three points carry most of the mechanics. The article also covers the places where borrowers confuse a lender’s limit with the VA’s limit.
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 Does “Full Value” Actually Mean?
Full value means 100% of the reasonable value the VA assigns to the home. It does not mean the price you hope to get, an online estimate, or an old purchase price. The number comes from the appraisal.
The rule sits in 38 CFR 36.4306, which says the new loan must not exceed 100 percent of the reasonable value, as determined by the Secretary, of the dwelling that secures it. VA regulations define reasonable value as the figure a qualified appraiser, free of personal interest or bias, would recommend as a proper price. You can’t pick it. The lender can’t pick it either.
The appraisal produces a Notice of Value (NOV). The loan ceiling is tied to the value on that document.
Where the Cap Comes From
The cap is a regulation, not a lender habit. The VA Lenders Handbook, Chapter 6 applies it to cash-out loans: the maximum loan may not exceed 100 percent of the reasonable value of the property securing the loan. The funding fee and any eligible energy efficiency improvements are part of the loan, so together they must stay inside that line.
The same chapter says there is no maximum dollar amount for VA loans. So the cap is a percentage of value, not a dollar limit. With full entitlement, no VA loan limit applies. Across the wholesale programs Lendmire works with, VA files reach amounts up to $4,000,000 with full entitlement, subject to lender guidelines. If your entitlement is partly used, speak with a loan officer, because a down payment may come into play.
The full-value ceiling is also relatively recent. A 2019 VA circular, Circular 26-19-05, states that the VA will no longer guaranty refinancing loans when the loan-to-value ratio exceeds 100 percent. It also states that a financed funding fee cannot cause the loan to exceed the reasonable value.
How the Maximum Loan Is Calculated
The maximum loan is the reasonable value times 100%, with the funding fee and any eligible energy improvements sitting inside that number. The formula for loan-to-value, per the same circular, is the total loan amount (including the funding fee, if any) divided by the reasonable value the appraiser determined.
Here is the step-by-step logic, with defined terms:
- Ceiling = appraised reasonable value × 100%.
- Total loan = the new principal balance, including any financed funding fee.
- Cash to you = ceiling − payoff of all liens − financed funding fee (if the fee is financed) − closing costs paid from proceeds.
The last line is the practical working of the rule. The cap is the ceiling, and a lender can set a lower one. The VA’s number is the outer boundary.
Walk through it in percentages. Say a home appraises at a value we’ll call 100. Your existing mortgage payoff is a share of that, say 60%. The financed funding fee on a first-use cash-out is 2.15% of the loan. Closing costs paid from proceeds take another slice. What remains of the 100% room, after the 60% payoff, the fee, and the costs, is your cash. Nothing in that math lets the total loan climb above 100.
Why the Funding Fee Doesn’t Sit on Top
The fee counts toward the cap, so financing it uses up room you could otherwise take as cash. Many borrowers overlook this when they estimate how much cash they will receive.
The funding fee for a cash-out refinance is 2.15% for first use and 3.3% for subsequent use, per the network’s parameters. It is financeable. It is waived for veterans receiving compensation for a service-connected disability and the other exempt groups. Reduced fee tiers tied to a down payment do not apply to refinance loans, which makes sense, since a refinance has no down payment.
Run through two structures:
1. Fee financed. The fee is added to the loan. It uses part of the 100% room, so the cash check shrinks by that amount.
2. Fee paid out of pocket. The loan stays lower, and more of the 100% room remains as cash to you.
Either way, the ceiling is the same. The fee only changes how much of that room is cash to you. A veteran who is exempt keeps the full room. An older VA circular, Circular 26-18-30, adds that if a Veteran closes above the line, the Veteran must pay the amount that exceeds 100 percent of the property value at closing.
Confirm the current fee percentages with your loan officer, because VA updates its fee schedule from time to time.
What Happens When the Appraisal Comes In Low?
A low appraisal cuts the maximum loan dollar for dollar. Because the value sets the ceiling, a drop in value shrinks the room, and the cash shrinks with it.
Consider a scenario where you expected the home to appraise at one level and it comes in about 5% under that. The payoff on your existing loan doesn’t move. The fee, if financed, scales with the loan. So the entire 5% shortfall comes out of your cash. If the payoff is already close to the ceiling, there may be little or no cash left, or the refinance may not work as a cash-out at all.
If the shortfall pushes fee plus costs past the cap, the excess has to be paid by you at closing. That is the rule from the circular above. Practical options when value lands light:
- Pay the funding fee in cash rather than financing it, if you are not exempt.
- Reduce the cash you plan to take.
- Ask the loan officer whether the appraiser’s comparable sales support a reconsideration request.
Don’t plan a payoff of another debt around a value you haven’t seen.
Who Sets Which Limit?
Three different limits get mixed up. Only one is the VA’s.
| Limit | Who sets it | What it is |
|---|---|---|
| VA ceiling | VA regulation | 100% of reasonable value, fee inside |
| Lender overlay | The individual lender | A lower cap, often tied to credit |
| State law | The state | May restrict cash-out in some states |
The VA ceiling is the outer limit. A lender overlay is a stricter internal rule. Some lenders cap cash-out below the VA’s 100%, and some tie that cap to credit score. That is the lender’s choice, not a VA requirement. Across the wholesale programs Lendmire places VA loans with, the decision-score floor starts at 580, though VA itself sets no minimum score. Different lenders set different floors and caps, and that is why the same file can get different answers from different lenders.
State law is the third piece. Some states restrict cash-out lending. Because this is a national article, treat that only as a flag to check, not as a rule that applies to you.
How the Cap Compares With Other VA Loans and Conventional
The 100% cap is specific to the VA cash-out. The IRRRL and purchase loans work on different logic.
| Loan | Value tie | Cash out? |
|---|---|---|
| VA cash-out | Up to 100% of value, fee inside | Yes |
| IRRRL | Not tied to the 100% cap | No |
| VA purchase | 100% financing if price is not above value | n/a |
| Conventional cash-out | Set by lender and program | Yes |
The IRRRL builds its maximum from the existing VA loan balance plus allowable fees and the funding fee. It is not tied to the value cap, and it pays out no cash. It also needs no VA appraisal and carries a 0.5% fee unless exempt.
On a purchase, the VA lets you finance 100% with no down payment, provided the price is not above the appraised value, with no mortgage insurance of any kind. Conventional cash-out loans follow the lender’s own limits, which are typically lower than the VA’s 100%. For a head-to-head look, Lendmire’s piece VA Cash-Out Refinance vs. Conventional Cash-Out Above the Usual Loan-to-Value Cap covers that comparison.
Where the General Rule Bends
Several edge cases change what the cap means for your file.
The 90% figure is not the VA cash-out cap. You will hear “VA caps at 90%.” That is a mix-up. The 90% number appears in the regulation as one of the net tangible benefit options: a loan at 90 percent or less of reasonable value. It also appears in the fixed-to-adjustable rule, where a Type I loan that swaps a fixed rate for an adjustable one and charges more than one discount point is limited to 90 percent. Many lenders also set a 90% overlay of their own. None of that is the VA ceiling.
Type I and Type II. The VA sorts cash-outs by whether the new loan, fee included, exceeds the payoff. Type I does not exceed it. Type II does. Type I loans face a test that all fees and costs be scheduled to be recouped within 36 months of issuance, per 38 CFR 36.4306.
Non-VA loan into VA. Refinancing a conventional or FHA loan into a VA loan is treated as a cash-out even if you take no cash. The Handbook says a cash-out can pay off liens of any type. A borrower carrying PMI or FHA mortgage insurance may find that switching to the VA’s no-mortgage-insurance structure helps.
Term. The Handbook sets a maximum cash-out term of 30 years plus 32 days. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Occupancy. The home is generally expected to be your primary residence. Confirm the VA occupancy certification with your loan officer.
Seasoning. The cash-out carries the same seasoning as the IRRRL: the later of 210 days from the first payment and the sixth payment.
The Net Tangible Benefit Test
The VA wants the new loan to leave you better off in a defined way. Under 38 CFR 36.4306, the loan must meet at least one listed benefit. The listed benefits include eliminating monthly mortgage insurance, a shorter term, a lower rate, higher monthly residual income, refinancing a construction loan, and converting an adjustable loan to a fixed one. A loan at 90% or less of reasonable value is also one of them.
The rate-reduction and fee-recoupment tests are IRRRL rules and do not apply to the VA cash-out as a gate, apart from the Type I recoupment point above.
The lender must also give you an estimate of the dollar amount of home equity being removed. It must explain that taking equity out may affect your ability to sell later. That disclosure exists because of the risk in the next section.
The Risk of Borrowing at the Ceiling
At or near 100% of value, you have almost no equity cushion. If prices fall, you could owe more than the home is worth. That matters if you need to sell or move.
Other effects to weigh:
- Bigger balance. A larger loan and a reset term change your monthly budget. Residual income is the controlling test in VA underwriting, and the 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
- Smaller cash than expected. The financed fee and closing costs eat into the same 100% room.
- Appraisal dependence. The value sets the ceiling, so a surprise there changes everything.
- Full underwriting. Cash-out loans get a full credit, income, and residual-income review.
A CFPB report found that borrowers often use proceeds to pay down credit card and auto loan debt. Moving unsecured debt into a mortgage lowers monthly obligations, but it puts that debt behind your home.
Key Terms Defined
Reasonable value: The figure a qualified, unbiased appraiser would recommend as a proper price for the home, as determined through the VA appraisal.
Notice of Value (NOV): The VA document that states the reasonable value the loan ceiling is built from.
Funding fee: A one-time VA charge that can be financed into the loan and is waived for exempt veterans.
Lender overlay: A rule a lender adds on top of VA requirements, such as a lower cap or a higher score floor.
Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit.
Residual income: What is left of monthly income after major obligations and living costs, the controlling test in VA underwriting.
A Checklist for Confirming the Cap With a Lender
Before you rely on a number, run through this list:
1. Get your Certificate of Eligibility in hand. 2. Ask whether the lender applies the full 100% or an overlay below it. 3. Ask whether the funding fee is financed or paid in cash, and whether you are exempt. 4. Ask for the estimated equity being removed, which the lender must provide. 5. Ask which net tangible benefit the loan relies on. 6. Check whether your state restricts cash-out. 7. Confirm the occupancy certification.
Lendmire’s VA cash-out refinance program page lays out the program basics.
Frequently Asked Questions
Is the VA cash-out cap 90% or 100%?
It is 100% of reasonable value, with the funding fee inside it. The 90% figure shows up as a net tangible benefit option and as a limit on certain fixed-to-adjustable swaps. Many lenders also use 90% as their own overlay. That is a lender choice, not a VA rule.
Can the funding fee push my loan above 100% of value?
No. A financed fee counts toward the cap and cannot cause the loan to exceed reasonable value. If fee plus costs would pass the line, the excess is paid at closing. Paying the fee in cash keeps more of the room as cash to you, unless you are exempt.
Does a down payment lower the cash-out funding fee?
No. Reduced fee tiers tied to a down payment do not apply to refinance loans. The cash-out fee is 2.15% for first use and 3.3% for subsequent use, unless you are exempt.
What if the appraisal comes in below what I expected?
Your maximum loan drops with it, and so does your cash. The payoff does not change, so the whole shortfall comes out of the cash to you. You can pay the fee in cash, take less cash out, or ask whether comparable sales support a reconsideration request.
Is there a VA dollar limit on a cash-out refinance?
No. With full entitlement, no VA loan limit applies, and the cap is a percentage of value. With partly used entitlement, speak with a loan officer, because a down payment may be required. Lender guidelines and full file review still apply.
Does VA lend the money?
No. VA’s cash-out page says you go through a private bank, mortgage company, or credit union, not directly through VA. Lendmire is a mortgage broker that arranges VA loans through wholesale lenders. Nothing here is a commitment to lend.
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
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.
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References
2. VA Lenders Handbook (VA Pamphlet 26-7), Chapter 6, Refinancing Loans
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
7. VA.gov, Cash-out refinance loan
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: Who Offers a VA Cash-Out Refinance for the Highest Cash-Out Amount? · How a VA Lender Sizes a Full-Value Cash-Out on an Appreciated Home · VA Cash-Out Refinance Requirements When Using the Cash for a Business
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.