The Quick Read: A VA cash-out suits a veteran who wants to reach the most equity and avoid monthly mortgage insurance. A conventional cash-out suits a homeowner who has plenty of equity, strong credit, and no VA eligibility. The VA funding fee can be financed, but it sits inside the loan balance. Conventional loans have no funding fee, though their costs show up in other places.
Who Each Option Is Really For
Start with the honest answer. If you have VA eligibility and want to pull out a lot of equity, the VA cash-out usually gets you further. It reaches up to 100% of the appraised value, including the financed fee. It also carries no mortgage insurance.
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.
If you have a lot of equity and solid credit, a conventional cash-out can work well. It leaves more equity in the house. It also doesn’t depend on a Certificate of Eligibility.
Here’s the catch with “fee rolled in.” Only the VA loan has a funding fee. Conventional cash-out doesn’t. Its costs arrive as pricing adjustments, origination charges, and sometimes mortgage insurance. So the two aren’t a like-for-like comparison. You are really comparing two different cost structures.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Maximum leverage | Up to 100% of appraised value, fee included | Lower; set by the lender’s matrix |
| Credit floor | 580 decision score on wholesale programs | Typically higher |
| Mortgage insurance | None | Often required above 80% leverage |
| One-time fee | Funding fee, financeable | No funding fee |
| Occupancy | Must live in the home | Varies by occupancy type |
| Eligibility | Certificate of Eligibility | None beyond standard rules |
| Benefit test | Net tangible benefit required | No equivalent test |
| Income review | Residual income is the controlling test | Debt-to-income and reserves |
Figures are subject to lender guidelines and full file review. Nothing here is a commitment to lend.
How the Rolled-In Funding Fee Works
The VA funding fee on a cash-out refinance is 2.15% for first use and 3.3% for later use. VA’s funding fee page confirms the fee applies to refinances unless you are exempt. It also notes that refinance fees don’t change with a down payment, so putting money in doesn’t lower your fee.
You can finance the fee. That means it’s added to your new loan balance. Two things follow.
First, the balance goes up. A bigger balance means a bigger payment and more interest over time. Think of it as borrowing the fee, not erasing it.
Second, the financed fee counts toward the 100% ceiling. If you’re already near the top of your equity, the fee eats into the cash you walk away with. Every dollar of fee rolled in is a dollar of proceeds you don’t receive.
Veterans who receive compensation for a service-connected disability, along with a few other groups, are exempt from the fee. VA also says you may qualify for a refund if you’re awarded that compensation later.
What a Conventional Cash-Out Charges Instead
Conventional has no funding fee. But free it isn’t. Fannie Mae’s Selling Guide says a loan-level price adjustment applies to certain cash-out refinances, based on leverage and credit score. That’s a pricing charge built into the loan.
You may also pay origination charges, appraisal and title fees, and mortgage insurance if you borrow above 80% of the home’s value. Conventional closing costs can be rolled in too. But they must fit under the leverage cap. As with VA, rolling them in shrinks your cash proceeds.
One practical point. A Closing Disclosure separates total closing costs from cash to close. Zero cash to close doesn’t mean zero costs. It usually means the costs were financed.
When the VA Cash-Out Is the Better Fit
The VA cash-out wins in a handful of situations.
- You need to reach a lot of equity. At up to 100% of appraised value, it goes further than most conventional options.
- You’d otherwise pay mortgage insurance. VA charges none, at any leverage. On a conventional loan above 80%, that’s a monthly cost.
- Your credit is middling. VA sets no minimum score itself, so any floor comes from the lender. The wholesale programs Lendmire places loans with start at a 580 decision score.
- You’re refinancing a non-VA loan into VA. A VA cash-out can refinance any loan type into a VA-backed loan.
- You’re exempt from the funding fee. With the fee waived, the VA path loses its main drawback.
- Your debt ratio is high but your cash flow is healthy. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
Two cautions. You must live in the home. And VA requires a net tangible benefit. The VA Lenders Handbook says all cash-out refinances must meet that requirement, and the lender must show you the test. Across the wholesale programs Lendmire works with, the benefit must be one of VA’s eight listed benefits.
For the program details, see Lendmire’s VA cash-out refinance program page.
When the Conventional Cash-Out Is the Better Fit
Conventional wins just as clearly in other situations.
- You aren’t eligible for VA. Without a Certificate of Eligibility, the question is settled.
- You have deep equity and want to keep it. Conventional takes less of your equity. If you only need a modest amount, a lower leverage loan may mean no mortgage insurance and no financed fee.
- You want mortgage insurance that can end. The CFPB says you can ask your servicer to cancel PMI when your balance is scheduled to reach 80% of the home’s original value. The VA funding fee never cancels. It stays in your balance.
- You don’t want a benefit test. Conventional has no net tangible benefit test. Its gates are the leverage cap, credit, and reserves.
- Strong credit changes the math. Pricing adjustments tied to credit score and leverage tend to be gentler at higher scores.
Picture the Same Homeowner Both Ways
Say you own a home with a healthy amount of equity and want to pull cash out.
On the VA side, you finance the 2.15% fee. Your balance rises by that percentage of the loan. You owe no mortgage insurance. If you borrow near 100% of value, the fee takes a bite out of your proceeds.
On the conventional side, you borrow to a lower leverage. You skip the fee. You may still face a pricing adjustment, and mortgage insurance if you go above 80%.
Which is cheaper? It depends on how much cash you need, how long you’ll keep the loan, and your credit. Ask for both on a Loan Estimate and compare total cost, not just the payment. A payment that drops can reflect a longer term, not a better deal.
Mistakes That Skew the Comparison
- Comparing only the payment. A longer term shrinks the payment while raising total interest.
- Ignoring the balance increase. A financed fee is still debt secured by your home.
- Assuming 90% is VA’s cap. The 90% figure is one net tangible benefit test, not VA’s ceiling.
- Confusing cash-out with the IRRRL. The IRRRL is a streamline for existing VA loans, with a 0.5% fee and no VA appraisal. A cash-out needs full credit and income review and an appraisal. The half-percent rate-reduction test is an IRRRL rule and never applies to the VA cash-out.
- Forgetting seasoning. VA cash-out carries the same seasoning as the IRRRL: the later of 210 days from the first payment and the 6th payment.
- Treating proceeds as free money. The CFPB notes that consumers can face substantial costs when accessing home equity, and paying closing costs is a common use of the cash itself.
Key Terms Defined
Funding fee: A one-time VA charge on most VA loans, which can be financed into the balance.
Net tangible benefit: A VA test showing the refinance actually helps you.
Residual income: The money left each month after major obligations, which is the controlling VA underwriting test.
Loan-level price adjustment: A pricing charge on certain conventional loans based on leverage and credit.
Certificate of Eligibility: The VA document that confirms you qualify for the benefit.
A Balanced Verdict
Neither loan wins everywhere. VA is built for veterans who need maximum equity access with no monthly mortgage insurance, and who accept a financed fee that stays in the balance. Conventional is built for borrowers with strong credit and plenty of equity who want to borrow less and keep options open.
If you’re exempt from the fee, VA gets much harder to beat. If you’re borrowing a modest amount and have strong credit, conventional often holds its own. In between, the answer comes from running both side by side.
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
Can the VA funding fee be rolled into a cash-out refinance?
Yes. The fee can be financed into the new loan balance. It counts toward the 100% ceiling, so it reduces your cash proceeds if you borrow near the maximum.
Does a conventional cash-out have a funding fee?
No. Conventional loans have no funding fee. Their costs come as pricing adjustments, origination charges, and mortgage insurance above 80% leverage. Those costs can often be rolled in if the loan stays under the leverage cap.
Will a bigger down payment lower my VA cash-out fee?
No. On a refinance, the fee doesn’t change with a down payment. It’s 2.15% for first use and 3.3% for later use, unless you’re exempt.
Does a VA cash-out require mortgage insurance?
No. VA loans carry no mortgage insurance of any kind. You pay the funding fee instead, unless exempt. Conventional loans above 80% leverage often require mortgage insurance, which can be cancelled later.
Can I refinance a conventional loan into a VA cash-out?
Yes. You need a Certificate of Eligibility, you must live in the home, and the loan must pass a net tangible benefit test and full underwriting.
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.
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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 – Funding fee and closing costs
2. Fannie Mae Selling Guide B2-1.3-03
3. VA Lenders Handbook VAP 26-7, Chapter 6
4. CFPB – When can I remove PMI
5. CFPB – Cash-out refinances and paydown behavior
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 Lenders Underwrite a VA Cash-Out Refinance When the Funding Fee Is Waived · VA Cash-Out Refinance vs Conventional Cash-Out for Military Borrowers · VA Cash-Out Refinance Requirements and How Much Cash a VA Loan Can Provide
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.