The Quick Read: The best program for you depends on your equity, your credit, and whether you qualify for the funding fee waiver. VA does not crown a winner. It sets one rule that governs everything: the new loan, including the financed funding fee, cannot exceed 100% of the home’s appraised value. Closing costs and the fee can ride inside the loan, but every dollar rolled in comes out of the cash you could have taken.
Lendmire’s VA cash-out refinance program page covers the basics. This article walks through the mechanics step by step, so you can see what “included” really means.
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.
What Does “Best” Mean for a VA Cash-Out?
“Best” is not one program. VA guarantees part of a loan that a private lender makes, so the rules come from two places: VA and the lender. You can’t shop for a better VA program. You shop for the lender whose guidelines fit your file.
Here is how “best” shifts with your goal:
| Your goal | What matters most |
|---|---|
| Most cash in hand | Appraised value, payoff, fewer costs financed |
| Smallest balance | Paying the fee and costs in cash |
| Lowest cash at closing | Financing the fee and costs |
| Leaving a non-VA loan | Cash-out into VA, no VA seasoning |
Across the wholesale programs Lendmire places files with, the lenders that write these loans differ on credit floors and how they treat your file. That is why a broker that shops several wholesale lenders can match your situation to a program. Lendmire brokers the loan. It does not lend.
How Does a VA Cash-Out Refinance Work?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan and lets you take equity as cash. You can use the cash to pay off debt, fund school, or improve the home, per VA Home Loans.
It also works on a loan that isn’t VA. The CFPB’s VA handout notes that a cash-out can move a non-VA loan into a VA-backed one. So you don’t need an existing VA loan. That is only required for the streamline refinance.
This is not a streamline. You need a VA appraisal and full underwriting. The home must be one you live in. And you need a Certificate of Eligibility (COE), which also shows whether you are exempt from the funding fee.
Can Closing Costs and the Funding Fee Be Rolled Into the Loan?
Yes, within the 100% cap. The fee can be paid in cash or included in the loan, according to the VA Home Loan Buyer’s Guide. The regulation, 38 CFR 36.4306, also lets the loan include authorized closing costs.
One myth is worth clearing up. “Only the funding fee can be financed” is a purchase-loan rule. On a refinance, allowable costs can be financed or paid from your proceeds, as long as the total stays under the cap.
You have three ways to handle each cost:
| Cost | Roll into loan | From proceeds | Out of pocket |
|---|---|---|---|
| Funding fee | Yes | Yes | Yes |
| Allowable closing costs | Yes, within cap | Yes | Yes |
| Prepayment penalty on old loan | Permitted by rule | Yes | Yes |
Lender overlays can narrow this. Some lenders cap what they will wrap in. Your Loan Estimate shows how each cost is handled on your file.
The 100% Rule: Where the Fee Sits
The cap works like a ceiling. The new loan, with any financed fee and costs, cannot go past 100% of the appraised value. VA Circular 26-19-05 confirms VA no longer guarantees refinances above 100% loan-to-value.
Every item you finance shrinks the cash. Say your home appraises with plenty of room. Financing the fee and costs means you pay nothing at the closing table, but the cash check is smaller and the loan balance is larger than it would be if you paid those items out of pocket. If you’re short on equity, costs may simply come out of your proceeds.
Work backward if you have a target. Start with the cash you need, add your payoff, the fee and the costs, and see if the total fits under 100% of value. If it doesn’t, you pay the difference in cash or take less.
How Much Is the Funding Fee on a Cash-Out?
The fee on a VA cash-out refinance is 2.15% for first use and 3.3% for later use, and it is a percentage of the new loan. The reduced tiers for a 5% or 10% down payment don’t apply to refinances, per VA’s funding fee exhibit. Equity does not lower it. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
For comparison, the IRRRL streamline fee is 0.5%. Confirm the current table on VA.gov before you budget, since schedules change.
The fee is a one-time charge, not a monthly premium. A VA loan carries no mortgage insurance, and that is a big part of why many borrowers like it. If you finance the fee, it adds to your balance and you pay interest on it for as long as you hold the loan.
Exemptions. Veterans who receive or are entitled to disability compensation are exempt from the fee, as are some other groups, such as active-duty Purple Heart recipients and certain surviving spouses. Your COE shows your status. Someone awarded compensation later may be eligible for a refund, so check VA.gov.
Finance the Fee or Pay It in Cash?
Financing the fee keeps cash in your pocket at closing. Paying it in cash keeps your balance lower. Neither is free.
| Item | Finance it | Pay in cash |
|---|---|---|
| Cash at closing | Lower | Higher |
| Loan balance | Higher | Lower |
| Interest over time | More | Less |
| Cash out available | Smaller | Larger |
If you plan to hold the loan a long time, paying cash is usually cheaper over the years. If you need every dollar now, financing makes sense. That is a real tradeoff, and the stronger play depends on how long you expect to keep the loan.
Type I or Type II: Which One Are You?
VA sorts cash-out loans into two types. A Type I loan, including the funding fee, does not exceed your payoff. A Type II loan does exceed it, which is how you walk away with cash. Both are defined in Circular 26-19-05.
A Type I refinance of an existing VA loan carries extra tests. The big one is fee recoupment: under 38 CFR 36.4306, fees and costs must be scheduled to be recouped within 36 months. That test applies to VA-to-VA Type I loans only.
Where the General Rule Breaks
Several edge cases change the math:
- Net tangible benefit. Every cash-out must give you at least one benefit, such as eliminating mortgage insurance, a shorter term, a lower payment, or a switch from an adjustable to a fixed loan. A new loan at 90% or less of value also meets the test.
- Seasoning. If you’re refinancing a VA loan, a waiting period applies: the later of 210 days from your first payment and your sixth payment. It does not apply when you refinance a non-VA loan.
- Other liens and construction loans. Cash-out can pay off liens besides a first mortgage. VA also treats a construction-to-permanent loan as a cash-out.
- Manufactured homes. These carry special lot and entitlement rules.
- Prepayment penalties. If your old loan charges one, the regulation lets the new loan cover it.
- Entitlement. With full entitlement, there is no VA loan limit. With remaining entitlement, a down payment may be required, so speak with a loan officer.
How Is a VA Cash-Out Underwritten?
Full underwriting, start to finish. Per the VA eligibility page, you must meet credit, income and occupancy requirements from both VA and the lender. The steps run like this:
1. Get your COE through a lender, VA.gov or by mail.
2. A lender reviews your credit, income and debts.
3. A VA appraisal sets the reasonable value.
4. The net tangible benefit is checked and the cash-out disclosures are issued.
5. You close, and the fee and costs are paid or financed.
Residual income is the controlling test. That’s the money left each month after your debts, taxes and living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
VA sets no minimum credit score, but lenders do. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher floor, which is why one lender may say no where another says yes. Everything is subject to lender guidelines and full file review.
How to Compare Offers
Ask each lender for a Loan Estimate and check four things:
- Is the funding fee financed, paid in cash, or waived?
- Which closing costs are rolled in and which come from proceeds?
- What is the new loan balance against your old one?
- How much cash do you actually net?
A broker lays several of these side by side. A cash-out also resets your term, so compare old and new term and payment before you sign.
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. Consumer lending is available in 16 states, and nothing here is a commitment to lend.
Key Terms Defined
Reasonable value: The value VA’s appraisal assigns to your home. It sets the 100% cap.
Funding fee: A one-time VA charge on the loan, paid in cash or financed. Exempt borrowers owe none.
Net tangible benefit: A required improvement to your loan, such as a shorter term or no mortgage insurance.
Seasoning: The waiting period before you can refinance a VA loan.
Residual income: What you have left monthly after debts and living costs. It is VA’s controlling test.
Frequently Asked Questions
Can I finance the funding fee on a VA cash-out refinance?
Yes, you can include it in the loan. The total must stay at or under 100% of the appraised value. Financing it raises your balance and the interest you pay over time.
Does having more equity lower the funding fee?
No. The reduced fee tiers tied to down payments apply to purchases, not refinances. The cash-out fee is 2.15% for first use and 3.3% after, unless you are exempt.
Can I refinance an FHA or conventional loan into a VA cash-out?
Yes. A cash-out can replace any loan type. You still need a net tangible benefit, but VA-to-VA seasoning does not apply to non-VA loans.
Do I need a VA appraisal and full underwriting?
Yes. Unlike the streamline, a cash-out requires a VA appraisal and a full review of income, credit and debts, with residual income as the controlling test.
Who is exempt from the funding fee?
Veterans receiving or entitled to disability compensation, active-duty Purple Heart recipients and certain surviving spouses. Your COE shows your status, so confirm it on VA.gov.
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
6. VA Circular 26-23-06, Exhibit B
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: Can You Refinance a VA Loan Again After a VA Cash-Out? · VA Cash-Out Refinance Limits for How Much Cash You Can Take · How a VA Lender Sizes a Streamline vs Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.