The Quick Read: The best program for your situation is usually a standard VA cash-out refinance, with or without an Energy Efficient Mortgage (EEM) add-on. VA has no separate “energy cash-out” product. The EEM rolls a small amount of approved upgrades into the loan and pays for them from escrow. Plain cash-out proceeds go to you with no strings. Which route fits depends on how big the project is and how much other cash you need.
What Are Your Two Routes?
You have two ways to pay for energy work with a VA cash-out refinance. One route uses an add-on for the energy work, and the other skips the add-on and uses ordinary cash-out proceeds for anything you choose. Both start with the same cash-out loan.
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 describes the cash-out refinance as replacing your current loan with a new one. It can pull cash from your equity. It can also move a non-VA loan into a VA-backed loan. Home improvements are a named use. You apply through a private lender, not VA itself.
The EEM is not a separate loan. VA News explains that it lets you roll the cost of approved energy-saving improvements into a VA-guaranteed purchase or refinance. Think of it as an attachment, not a product.
| Factor | Route A: EEM add-on | Route B: Plain cash-out |
|---|---|---|
| What it pays for | Approved energy upgrades only | Anything you choose |
| How funds reach you | Held in escrow, released after work | Paid to you at closing |
| Size limit | Capped by VA rules | Limited by home value |
| Paperwork | Cost documentation required | No upgrade documentation |
| Best for | Small, clearly eligible projects | Larger or mixed projects |
How Does the Loan Work, Step by Step?
A VA cash-out is underwritten like any VA loan, with extra tests for the refinance. You need a certificate of eligibility (COE), an appraisal, and a file that passes residual income. The lender then checks the cash-out tests. Here is the sequence.
1. Confirm eligibility. Your COE from VA decides whether you qualify. Service requirements are VA’s rules, not a lender’s.
2. Pick your route. Decide whether the upgrades will ride on an EEM or come out of your cash proceeds.
3. Document the work. If you use the EEM, the lender needs cost documentation. More on that below.
4. Get the appraisal. VA’s valuation sets the reasonable value of the home. Your loan is measured against that number, with the financed funding fee included.
5. Pass the cash-out tests. The refinance must show a net tangible benefit, meaning you come out ahead in a real way. A VA-to-VA refinance also needs seasoning, and VA’s cash-out user guide explains how VA applies that requirement.
6. Close, then finish the work. For an EEM, funds stay in escrow until the lender verifies the work is done and notifies VA. The deadline for finishing the work and the timing of each step vary by file and lender.
Across the wholesale programs we place VA files with, the cash-out reaches 100% of the appraised value, including the financed funding fee. It refinances any loan type into VA. Seasoning is the later of 210 days from the first payment and the sixth payment. All of this is subject to lender guidelines and full file review.
Which Energy Upgrades Does the EEM Cover?
VA’s examples include solar heating and cooling, weather stripping or caulking, added insulation, storm windows or doors, and vapor barriers. A smart thermostat on a shelf does not count.
Several things are off the table, per VA News:
- New construction
- Luxury items, such as hot tubs
- Improvements that don’t reduce energy use
- Appliances and non-permanent fixtures
Solar needs extra care. Some solar systems and equipment may not be valued in the appraisal. Ask your lender how a specific system would be treated before you sign a contract.
What Are the EEM Limits?
The EEM is small by design. For an EEM of up to $3,000, underwriting rests on the documented cost alone. For an amount above $3,000 and up to $6,000, the lender must document cost with bids or an itemized contract. It must also certify that projected monthly energy savings exceed the added cost. VA does not allow an EEM above $6,000.
The rule behind this sits in 38 CFR Part 36. In the higher tier, the increase in your monthly principal and interest should not exceed the likely drop in your utility costs. That is a savings test, and it is why the lender asks for the paperwork.
One benefit stands out. The added EEM amount does not charge extra entitlement, because the guaranty stays in the same proportion as it would have been without the improvements. That comes from 38 CFR 36.4302.
When Does Plain Cash-Out Beat the EEM?
Plain cash-out wins when your project is larger than the EEM allows or when you want flexibility. You also skip the escrow holdback and the savings certification. The tradeoff is that nothing verifies the work, and the money is yours to manage.
Here is a decision frame, in plain terms:
- Small, clearly eligible project: The EEM can fit. Insulation and weatherization are the classic case.
- Project over the EEM ceiling: Use cash-out proceeds for the excess. The EEM cannot stretch past its cap, but ordinary proceeds can fund the rest.
- Mixed project: If you are replacing windows and also redoing a kitchen, proceeds cover both. The EEM only touches the energy side.
- You need cash for other things: Plain cash-out is the cleaner tool.
- You already finished the work: The EEM is paid from escrow after verification, so it suits future work. Cash-out proceeds can reimburse you.
One wrinkle is worth knowing. The EEM is rarely used, so some lenders have little experience with it. For small projects this is a genuine toss-up: the EEM is tidy on paper but may be harder to find than a plain cash-out.
How Does a Worked Example Look?
Run the logic on a hypothetical home. Say the home appraises at a reasonable value of 100 units, and you owe 60% of that on your current loan. You want to add weatherization and insulation, plus cash for a roof.
Under this structure, the new loan can reach 100% of value including the financed fee. That leaves substantial room for the work. You receive the proceeds and hire your contractors.
The roof comes out of ordinary proceeds. The EEM portion is capped, and the lender needs your bids if it passes the lower tier.
Either way, the balance rises, and so does your monthly payment. A cash-out refinance also resets the loan term and can replace a low existing rate with a different one. That is mechanics, not a pitch. Whether the upgrades pay for themselves is a break-even question, and many do not.
Where Does the General Rule Break?
Several edge cases change the answer.
An IRRRL is not a cash-out. The Interest Rate Reduction Refinance Loan refinances an existing VA loan to a lower rate or from adjustable to fixed. It needs no VA appraisal. It generally provides no cash. A narrow exception reimburses certain recently completed energy improvements. Confirm the current terms with VA before relying on it.
VA-to-VA versus non-VA-to-VA. Seasoning applies to VA-to-VA refinances. Net tangible benefit applies to both. Type 1 and Type 2 cash-outs also carry different disclosures, per VA’s user guide.
Occupancy. VA loans are for homes you live in. Lenders confirm this in the file.
Lender overlays. A lender can set rules tighter than VA’s. Some cap cash-out below 100% of value. Some set a higher credit floor. Across the wholesale programs we use, the floor starts at a 580 decision score, though VA itself sets no minimum score.
Over the EEM cap. The extra cost comes from ordinary proceeds or your own funds.
What Does the Funding Fee Do to the Math?
The VA funding fee is a one-time charge, and it can be financed into the loan. For a cash-out refinance it is 2.15% on first use and 3.3% on later use. Veterans who receive compensation for a service-connected disability, and other exempt groups, owe nothing.
The fee counts toward the 100% ceiling. It trims the cash you receive. Closing costs still apply as well. You will see them itemized on your Loan Estimate and Closing Disclosure. Compare those documents line by line when you shop.
Two other VA features matter here. There is no mortgage insurance on a VA loan. And residual income is the controlling underwriting test: the 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table. Always subject to lender guidelines.
Key Terms Defined
EEM (Energy Efficient Mortgage): An add-on that rolls approved energy upgrades into a VA purchase or refinance loan.
Residual income: What you have left each month after major obligations, which VA treats as the controlling test.
Net tangible benefit: A real, measurable improvement to your loan or finances that a refinance must show.
Seasoning: The waiting period required after a loan’s first payments before you can refinance it.
Notice of Value: VA’s appraisal result that sets the home’s reasonable value.
COE (Certificate of Eligibility): The VA document that confirms you qualify for the benefit.
How Do You Find the Right Program Fit?
The best lender and program for your situation depend on your loan history, your equity, the size of the project, and how much cash you need. A broker’s job is to match that to a lender that offers what you need. Lendmire’s VA cash-out refinance program page lays out the structure. It works with a nationwide network of wholesale cash-out refinance lenders, so the file goes to the ones that fit.
Ask any lender these questions up front:
- Do you offer the EEM add-on with a cash-out?
- Do you cap cash-out below 100% of value?
- How do you handle the escrow and the completion check?
- What does the Loan Estimate show for the full cost?
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. Reach the team at 828-256-2183. Consumer lending is available in 16 states, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I add an energy-efficiency package to a VA cash-out refinance?
Yes, in many cases. The EEM attaches to a VA purchase or refinance, so it can ride alongside a cash-out. The upgrades must be permanent and energy-saving, and the amount is capped at $6,000. Whether it is available depends on the lender, since some do not offer it.
What if my project costs more than the EEM allows?
Fund the difference from ordinary cash-out proceeds or other savings. The EEM cannot go past its cap, but plain proceeds are limited only by the home’s reasonable value and your lender’s rules. That keeps the whole project financeable in one loan, subject to full file review.
Does the EEM use up more of my VA entitlement?
No. The guaranty stays in the same proportion as it would have been without the improvements, so the added amount does not charge extra entitlement. Your remaining entitlement is otherwise unaffected by that portion.
Do I still pay a funding fee on a cash-out refinance?
Usually, yes. It is 2.15% on first use and 3.3% on later use, and it can be financed. Veterans receiving compensation for a service-connected disability and other exempt groups pay none. The fee counts toward the 100% ceiling.
Should I use a cash-out or an IRRRL for energy work?
The IRRRL generally provides no cash, apart from a narrow energy reimbursement exception. Use a cash-out when you need real funds for upgrades. Use an IRRRL when your goal is only a lower rate or a fixed term on an existing VA loan.
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.gov: Cash-out refinance loan
2. VA News: Energy Efficient Mortgages
3. VA Cash-Out Refinance User Guide
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 to Get a VA Cash-Out Refinance as an Eligible Veteran Step by Step · VA Cash-Out Refinance vs Conventional Cash-Out Using Remaining Entitlement · How Much Cash Comes Out of a VA Cash-Out Refinance With an Old Appraisal?
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.