The Quick Read: A VA cash-out refinance is the VA product that lets allowable closing costs and the funding fee become part of the new loan balance, though no single program is best for every borrower. The new loan can reach 100% of the home’s appraised value, including the financed funding fee. Rolling costs in means less cash at the table but a bigger balance, and less cash back to you. Whether it works depends on your equity, your entitlement, and your residual income.
What Does “Rolled Into the Loan” Actually Mean?
On a VA cash-out refinance, “rolled in” means the costs are added to the new loan balance instead of paid from your pocket. The new loan then pays off the old one, covers the costs, and sends any remainder to you.
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.
The phrase gets used loosely, and that causes confusion. Three different things hide behind it:
| Method | Effect on loan amount | Effect on cash you receive |
|---|---|---|
| Pay out of pocket | Loan stays smaller | Full cash-out amount |
| Roll into the balance | Loan grows | Cash back shrinks if at the value cap |
| Pay from proceeds | Costs come out of the cash-out | Cash back shrinks at closing |
The last two look alike on paper. Both reduce what you walk away with when the loan is already near the value cap. The first is the only one that keeps your cash intact, and it requires cash on hand.
The regulation behind VA refinancing allows a refinance loan to include authorized closing costs and contractual prepayment penalties on the loan being replaced. You can read the rule in 38 CFR 36.4306. That is why a cash-out refinance can finance costs that a VA purchase loan generally cannot.
How Does the VA Cash-Out Refinance Work?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. VA guarantees it, but a private lender makes it. Across the wholesale programs we place files with, the structure is consistent, and the program itself is easy to follow.
Lendmire’s VA cash-out refinance program page covers the basics. Here are the mechanics that matter for costs.
- Any loan type can refinance in. The VA cash-out refinances conventional, FHA, and existing VA loans into a VA loan. That makes it the route for a homeowner who wants out of mortgage insurance on another program.
- Up to 100% of appraised value. The new loan, including the financed funding fee, can reach 100% of the appraised value. There is no VA loan limit with full entitlement.
- Decision score. VA sets no minimum credit score. The wholesale programs we place with start at a 580 decision score, and individual lenders can set their own overlays.
- No mortgage insurance. VA loans carry none. Instead there is a one-time funding fee.
- Seasoning and benefit. The cash-out carries the same seasoning as the streamline (the later of 210 days from the first payment and the sixth payment) and must show a net tangible benefit.
Everything here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
What Is the Funding Fee, and Can It Be Financed?
The funding fee is a one-time VA charge, and yes, it can be financed into the loan. On a cash-out refinance it is 2.15% for first use and 3.3% for subsequent use. Veterans receiving compensation for a service-connected disability, and other exempt groups, pay nothing.
VA Pamphlet 26-7, Chapter 8 says each veteran owes the fee at closing unless exempt, and allows it to be financed. VA’s own funding fee and closing costs page lists the exemptions. Your Certificate of Eligibility typically shows whether you are exempt.
Exempt status matters more than almost any other variable here. An exempt borrower has a smaller balance to start with, so more of the 100% value cap is left for cash.
How Do You Define “Best” for Your Situation?
There is no single best program or lender. The best fit depends on your equity, entitlement history, goal, and file. A broker can shop several wholesale lenders, and that is where the matching happens.
Use these criteria instead of a ranking:
1. Your goal. Cash for a project, debt payoff, or moving from a non-VA loan into VA each point to different structures.
2. Your equity. With a full 100% cap, thin equity leaves little room for costs plus cash.
3. Your funding fee status. Exempt, first use, or subsequent use changes the balance meaningfully.
4. Your residual income. This is the controlling underwriting test. The 41% debt-to-income figure is a guideline, not a cap, but a higher ratio needs residual income well above the table.
5. Lender overlays. Some lenders set a higher credit floor or a lower value cap than the program allows. Which ones write your file depends on your profile.
Worked Example: Same Home, Three Ways
Picture a home appraised at 100% of value with a payoff balance at 60% of that value. This is illustrative only and uses percentages, not dollars.
- Costs paid out of pocket. The new loan covers the payoff and the funding fee. The cash back is the remaining room under the cap. You bring cash for the other closing costs.
- Costs rolled in. The new loan covers the payoff, the funding fee, and the allowable costs. You bring no cash for costs. The balance is higher, and the cash back is smaller by the amount of the costs.
- Costs paid from proceeds. The loan amount matches the rolled-in case. The costs are simply deducted from the cash you would receive.
If the new loan sits at 100% of value in all three, rolling costs in does not create new borrowing room. It spends the room you had. A borrower who needs a fixed amount of cash should ask the loan officer to size the loan backward from that number.
Which Costs Can Roll In, and Which Cannot?
Allowable closing costs and the funding fee can be financed on a cash-out refinance. Some items still get paid separately depending on the lender and the file.
| Item | Typically handled |
|---|---|
| Funding fee | Can be financed; exempt veterans pay none |
| Allowable closing costs | Can be included within the value cap |
| Prepayment penalty on the old loan | Can be included per the regulation |
| Lender-specific items | Varies by lender and file |
Lender items vary, so the Loan Estimate is where you see what is actually being financed. That form has a line labeled “Closing Costs Financed (Paid from your Loan Amount),” which the CFPB’s rule on the Loan Estimate requires. Compare that line across offers.
How Is a Cash-Out Different From a Streamline?
A cash-out refinance gives you equity as cash. The IRRRL, VA’s streamline, does not. The IRRRL refinances an existing VA loan into a new one, including from adjustable to fixed, with no VA appraisal, a 0.5% funding fee unless exempt, and a net tangible benefit.
The IRRRL also allows fees and closing costs to be financed, within its own cap. The regulation at 38 CFR 36.4307 sets that cap at the loan balance plus closing costs plus a discount of no more than 2% of the loan amount.
The decision rule is plain. If you hold a VA loan and only want to improve your loan terms or move to a fixed term, the IRRRL is built for that and costs less in funding fee. If you want equity, or you are moving from a non-VA loan, the cash-out is the product.
Where Does the General Rule Break?
Several edge cases change the answer.
- Purchase loans. On a VA purchase, closing costs generally cannot be included in the loan. The funding fee is the common exception. The VA Buyer’s Guide says so, which is why advice written for purchases misleads refinance borrowers.
- Type I and Type II cash-outs. Industry usage separates a loan that does not exceed the payoff from one that does. A Type I loan with costs rolled in raises the recoupment question below.
- Recoupment. The regulation refers to a 36-month window for recouping costs through lower payments. Whether that test applies to your loan type depends on the loan and lender, so ask directly.
- No cash taken. Some borrowers use a cash-out only to switch from a non-VA loan and take no cash. It still counts as a cash-out structure, and it still needs a net tangible benefit.
- Occupancy. VA cash-out is for a home you live in as your primary residence.
- Manufactured homes. These have separate refinance provisions in the regulation.
Is Rolling Costs In Worth It?
It is worth it when keeping cash matters more than keeping the balance small. It is a poor trade when the balance would creep close to the value cap with nothing left as a buffer.
Every financed dollar adds to the balance, the payment, and lifetime interest. Rolling costs in is a loan, and a loan has a price. Borrowing near full value also leaves little cushion if prices fall.
Rolling in tends to fit a borrower who:
- is exempt from the funding fee,
- needs the cash back more than a low balance,
- has strong residual income, and
- plans to stay in the home long enough to recoup the costs.
Paying costs in cash tends to fit a borrower who has savings and wants the smallest possible balance, or who expects to sell or refinance again soon. This is a genuine toss-up for many files. 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 and shows your entitlement and any funding fee exemption.
Funding fee: A one-time VA charge on most VA loans that can be financed into the balance.
Net tangible benefit: A test requiring the new loan to give you a real, measurable advantage.
Residual income: The money left each month after major obligations, which is the controlling VA underwriting test.
Seasoning: The waiting period after your current loan begins before you can refinance it.
Recoupment: Earning back the cost of a refinance through lower payments over time.
How Does the Process Run, Step by Step?
1. Get your COE. It confirms eligibility, entitlement, and exempt status.
2. Define the goal. Decide how much cash you need, and whether you want costs rolled in.
3. Compare programs and lenders. A broker shops several wholesale lenders and matches your file to the program.
4. Apply and review the Loan Estimate. Check the financed-costs line and total cash to close.
5. Appraisal. The VA appraisal sets reasonable value, which caps the loan.
6. Underwriting. Credit and residual income get a full review.
7. Review the Closing Disclosure. It must reach you three business days before closing, and it should match your Loan Estimate. The CFPB guide to the two forms explains how to compare them.
Lenders set their own document lists, so expect requests for pay records, ID, and statements on the loan you are paying off. Watch for misleading refinance offers; VA itself warns about them on its cash-out refinance page.
Who Is This Program Wrong For?
It is wrong for a borrower with thin equity who needs a lot of cash and wants costs financed too, because the 100% cap leaves no room for both. It is also wrong for a VA borrower who only wants a lower payment, where the IRRRL is simpler.
Frequently Asked Questions
Can I roll all my closing costs into a VA cash-out refinance?
Allowable costs, yes, within the value cap. The regulation permits a refinance loan to include authorized closing costs and prepayment penalties on the old loan. Some lender-specific items may still need to be paid separately, so the Loan Estimate shows what is actually financed.
Will I get less cash if I finance the costs?
Usually, yes. When the new loan is already near 100% of appraised value, every financed dollar comes out of your available cash. Financing costs does not create new room under the cap.
Is the funding fee financeable?
Yes. The VA funding fee on a cash-out refinance can be financed into the loan, though the amount depends on whether it is a first or subsequent use of the benefit. Veterans receiving compensation for a service-connected disability and other exempt groups are not charged the fee.
Can I use a VA cash-out if my current loan is not a VA loan?
Yes. The VA cash-out refinances any loan type into a VA loan, which is one of its main uses. It still requires a Certificate of Eligibility, a net tangible benefit, and full underwriting.
What if I take no cash out?
You can still use the cash-out structure to move into a VA loan. The loan must pass the same net tangible benefit test and credit review. If you already hold a VA loan and want no cash, the IRRRL is usually the simpler tool.
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.
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. 38 CFR 36.4306 (govinfo, 2025 edition)
2. VA Pamphlet 26-7, Chapter 8
3. VA.gov — Funding fee and closing costs
7. CFPB guide to the two forms
8. 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: How a VA Lender Sequences VA Cash-Out Refinance Approval · VA Cash-Out Refinance vs VA IRRRL for a Veteran Refinancing Again · How to Refinance a VA Loan Under Streamline or Cash-Out Guidelines
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.