The Quick Read: There is no separate cash-out program just for disabled veterans. The best program for your situation is the standard VA cash-out refinance, and your disability compensation changes two things: the funding fee and how your income is counted. It does not change the equity rules, the appraisal, or the net tangible benefit test. The right fit depends on your loan, your equity, and your file.
Here is what that means in practice. You use the same loan as every other veteran. The difference is what you pay to get it and what the lender is allowed to count.
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: 7.24% as of October 29, 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.
Lendmire’s VA cash-out refinance program page covers the product itself. This article covers the part most pages skip: what your disability status does and does not change.
How Do You Define “Best” for a Disabled Veteran?
“Best” depends on five things: whether you want cash or just a better loan, what kind of loan you hold now, whether your disability claim is settled, how much equity you have, and how the payment fits a fixed or benefit-based income. No single program wins for everyone.
Here is how that sorts out in practice.
| Your situation | Likely best fit |
|---|---|
| Rating in place, want cash from equity | VA cash-out refinance |
| Non-VA loan (FHA or conventional), want VA terms | VA cash-out refinance, often with no cash back |
| Existing VA loan, want a lower rate or a fixed rate | VA streamline refinance |
| Claim still pending | Talk through timing before you apply |
| Little equity, no need for cash | Keep the loan you have |
The VA streamline refinance is the Interest Rate Reduction Refinance Loan. It refinances an existing VA loan only, and it is not a cash-out product. Lendmire’s piece VA Refinance Guidelines for Veterans Choosing Streamline or Cash-Out walks through that choice in more detail.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. You can use it to pull cash from your equity, or to move a non-VA loan into a VA loan. VA describes it as a new loan on new terms.
VA does not lend directly. A private lender makes the loan, and terms and fees vary by lender. That is why shopping matters. A broker like Lendmire arranges the loan through wholesale lenders and does not lend itself.
The headline features, across the wholesale programs we place VA files with:
- Financing up to 100% of the appraised value, including the financed funding fee.
- No mortgage insurance of any kind.
- No VA loan limit with full entitlement.
- A 580 decision-score floor. VA itself sets no minimum score, so this is a lender requirement.
- Residual income as the controlling cash-flow test.
All of this is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
What Does Your Disability Status Change?
Two things change: the funding fee and the way your income is treated. That is the whole list.
The funding fee. The funding fee is a one-time VA charge that can be financed into the loan. On a cash-out refinance it is 2.15% for first use and 3.3% for later use. If you receive VA compensation for a service-connected disability, the fee is waived.
Your income. VA disability compensation counts as income, and it is tax-free. That can strengthen the file.
On a larger loan, the fee waiver is often the biggest VA-specific saving. It does not erase the appraisal, title, or other closing costs. Those still apply.
What Does Your Disability Status Not Change?
Your rating does not loosen the underwriting. Every cash-out refinance gets full credit underwriting, with credit, income, and residual income all documented. The VA Lenders Handbook says full underwriting applies to every cash-out type.
A side-by-side makes it clear:
| Item | Changed by disability? |
|---|---|
| Funding fee | Yes, waived for exempt veterans |
| Disability income counted | Yes, as stable benefit income |
| Appraisal requirement | No |
| Net tangible benefit test | No |
| Credit review and residual income | No |
| Occupancy rule | No |
Who Is Exempt From the Funding Fee?
You are exempt if you receive VA compensation for a service-connected disability. VA News lists several exempt groups:
- Veterans receiving compensation for a service-connected disability.
- Veterans eligible for compensation who receive retirement or active-duty pay instead.
- Service members with a proposed or memorandum rating issued before the closing date.
- Active-duty members with a Purple Heart on or before closing.
- Surviving spouses in the categories VA lists.
VA also notes that more than half of Veterans who got a VA-guaranteed home loan since 2021 were exempt.
Notice what the list says: receiving compensation. It names no rating percentage. You will see websites claiming you need a 10% rating or higher. VA’s own list does not say that. The exemption turns on receiving compensation, not on a number.
How Do You Prove the Exemption?
Your Certificate of Eligibility, or COE, is the document that decides it. The COE is VA’s proof of your eligibility. You can get one through a lender, on VA.gov, or by mail. It can show your funding fee status and your disability income.
Here is what to do:
1. Get your COE early and check that it shows the exemption.
2. Bring your VA award letter as backup.
3. Check the Loan Estimate. The funding fee line should show zero if you are exempt.
4. If the COE does not reflect your status, raise it before closing, not after.
Lenders may verify exemption status before closing. If they cannot confirm it, the fee may be collected.
What If Your Disability Claim Is Still Pending?
This is the edge case most pages skip. If your claim is unresolved at closing, the lender may need to collect the fee. Whether a refund is available later if VA grants compensation depends on the specifics of your loan and your claim, so it shouldn’t be treated as a given.
So don’t assume a refund. Ask your lender and VA directly. If your decision is close, timing the refinance after the claim is decided can remove the question entirely. Service members with a proposed or memorandum rating before closing can be exempt, per VA’s list above.
How Is the Loan Underwritten, Step by Step?
Underwriting follows a set order. Each step has a specific job.
Step 1: Entitlement and COE. The lender confirms your eligibility and exemption status.
Step 2: Credit and income review. The lender documents your credit, your income, and your obligations. Across the wholesale programs we place files with, the decision-score floor is 580. Some lenders set a higher floor.
Step 3: Residual income. Residual income is what is left each month after your major obligations and living costs. It 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 VA table.
For disabled veterans, the VA Lenders Handbook on underwriting says disability income is a benefit and does not need continuance documentation. If you receive VA Pension or disability benefits with Aid and Attendance, the lender should check continuance with VA.
One detail matters. Tax-free compensation can help your debt-to-income ratio. For residual income, it counts at its actual amount. Don’t expect the tax-free boost to carry the cash-flow test.
Step 4: VA appraisal. An appraisal is required on a cash-out refinance. A VA-approved appraiser sets the reasonable value, and VA issues a Notice of Value. You pay for the appraisal up front.
Step 5: Net tangible benefit. The loan has to leave you better off in a defined way. More on that next.
Step 6: Closing. You receive a Loan Estimate and a Closing Disclosure, as with any consumer mortgage. Allowable costs on a cash-out can often be paid from the loan proceeds.
What Is the Net Tangible Benefit Test?
The net tangible benefit test, or NTB, checks that the refinance actually helps you. VBA Circular 26-19-05 says it applies to all cash-out refinancing loans. The circular took effect for applications taken on or after February 15, 2019.
One criterion in the Handbook is a new loan at or below 90% of reasonable value. People mix this up with a cap. VA removed the old 90% limit on regular cash-outs, so loans can reach 100% of value, with the financed funding fee counted inside that ceiling. The wholesale programs we place VA files with reach 100% of the appraised value, though a given lender can still set its own lower cap.
How Do Type I and Type II Loans Differ?
The difference is whether you walk away with cash.
- Type I: The new loan, including the funding fee, does not exceed the payoff of the loan being refinanced. No cash comes to you.
- Type II: The new loan goes beyond the payoff. You receive cash.
The circular defines both. This matters because extra tests apply to Type I loans when you refinance one VA loan into another:
- Seasoning: a waiting period on the existing loan. Across our programs, a VA cash-out carries the same seasoning as an IRRRL: the later of 210 days from the first payment and the 6th payment.
- Fee recoupment: the new loan must pay back its costs through savings over time.
- Rate reduction: the Handbook requires a fixed-to-fixed Type I VA-to-VA cash-out to carry a meaningfully lower rate, and the reduction cannot come only from lender-paid or borrower-paid pricing adjustments.
A non-VA loan moving into VA does not face those VA-to-VA tests. That makes an FHA or conventional borrower a common fit for a Type I conversion.
Where Does the General Rule Break?
Several edge cases change the answer.
Fixed rate into an adjustable loan. The Handbook limits the new loan to 90% of reasonable value when a fixed-rate loan is refinanced into an ARM and more than one discount point is charged.
Paid-off homes. Whether a cash-out refinance is available on a home with no existing mortgage is a question to put to the lender.
Occupancy. The loan is for a home you or, in some cases, a spouse or dependent will live in. VA’s home loan page says so. If the property is a rental or second home, occupancy decides the leverage, and these programs are built around a home you live in.
Entitlement. A cash-out can affect your remaining entitlement and future funding fee tier. Ask your loan officer how it applies to you before you commit.
Surviving spouses. They appear on VA’s exempt list. For more on that path, see Lendmire’s piece, Can a Veteran’s Family Qualify for a VA Cash-Out Refinance?.
When Does Cash-Out Make Sense for a Disabled Veteran?
It makes sense when the cash does a job. Common jobs include paying off high-cost debt, funding home improvements, and covering accessibility modifications. A cash-out also lets you move off a non-VA loan.
It makes less sense when the new balance strains a fixed or benefit-based income. Cash-out raises the loan balance, can raise the payment, and restarts or extends your term. A financed fee adds to the balance too, though an exempt veteran adds nothing.
Think of it as a stress test. Ask whether you could carry the new payment comfortably if other expenses rose. Residual income already pushes the lender to ask that. You should ask it first.
Consider a veteran with a service-connected rating, a non-VA loan, and solid equity. Say they want to move into VA terms and pay off some debt. They pay no funding fee. They still pay for the appraisal and other closing costs. The new loan clears the net tangible benefit test because it replaces the old loan on better terms. That is a typical fit.
Now consider a veteran whose claim is pending. The loan may be possible, but the fee question is open. Waiting for the decision can be the cleaner path.
How Does Cash-Out Compare With the Alternatives?
| Option | Best for | Main tradeoff |
|---|---|---|
| VA cash-out refinance | Cash plus VA terms | Replaces your whole loan |
| IRRRL | Existing VA loan, lower or fixed rate | No cash out |
| Conventional cash-out | Borrowers without VA entitlement | Mortgage insurance may apply above certain leverage |
| Home equity loan or line | Keeping your current first loan | A second payment on top of it |
An IRRRL needs no VA appraisal and carries a 0.5% fee unless you are exempt. A cash-out costs more to arrange but is the only VA option that puts equity in your hand.
What Should You Bring and Ask?
Bring your COE, your VA award letter, recent pay or benefit statements, and your current mortgage statement. Then ask each lender:
- Does my file show the funding fee as waived on the Loan Estimate?
- What is your maximum loan-to-value, and is it lower than VA’s?
- What minimum score and overlays do you apply?
- How do you count my disability income for residual income?
- How does this affect my remaining entitlement?
VA suggests contacting several lenders because terms and fees vary. A broker can shop multiple wholesale lenders for you and match your scenario to a program. The lenders that write this loan depend on your credit profile, equity, and file.
Watch for look-alike offers. The CFPB and VA have warned about refinance offers that appear official and promise “no out-of-pocket costs.” Be wary of those. The costs are built into the loan balance, not erased.
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
Certificate of Eligibility (COE): The VA document that confirms you qualify for a VA loan and can show your funding fee status.
Funding fee: A one-time VA charge on the loan, which can be financed and is waived for exempt veterans.
Net tangible benefit (NTB): A test showing the refinance leaves you better off in a defined way.
Residual income: The money left each month after major obligations and living costs, and the controlling VA cash-flow test.
Type I and Type II: Type I cash-outs bring no cash to you, while Type II cash-outs do.
IRRRL: The streamline refinance for an existing VA loan, with no cash out.
Frequently Asked Questions
Do I need a specific disability rating to waive the funding fee?
No percentage is named on VA’s exempt list. The test is whether you receive compensation for a service-connected disability. Sites that claim a 10% minimum are not citing VA’s own list.
Does the fee waiver also remove my closing costs?
No. Only the funding fee is waived. Appraisal, title, and lender and closing costs still apply, and costs are built into either the loan or what you pay at closing.
Can I refinance an FHA or conventional loan into a VA cash-out?
Yes, VA allows a cash-out refinance to move a non-VA loan into a VA-backed loan. It can be done with no cash back, as a Type I loan, subject to lender guidelines and full file review.
Does VA disability income count toward qualifying?
Yes. It counts as stable benefit income, and tax-free compensation can help your debt-to-income ratio. For residual income it counts at its actual amount.
How much equity can I take out?
VA allows loans up to 100% of appraised value, including the financed fee. The programs we place files with reach that level, but individual lenders may set a lower cap. Your appraisal and file decide the real number.
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. Call 828-256-2183 to talk it through.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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.gov: Cash-out refinance loan
2. VA Lenders Handbook, Chapter 6
3. VA News: Funding fee, who pays and who is exempt
4. VA Lenders Handbook, Chapter 4
6. VA Home Loans (benefits.va.gov)
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: VA Refinance Guidelines for Veterans Choosing Streamline or Cash-Out · How a VA Lender Sequences VA Cash-Out Refinance Approval · VA Cash-Out Refinance Documentation Needed Before Approval
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.