The Quick Read: A veteran-heir can buy out co-owners with a VA cash-out refinance, but only in the right setup. VA has no special “heir buyout” product. The buyout is an ordinary cash-out refinance in which the new loan pays off an existing lien and funds the payment to the other heirs. The big gate is that a lien generally has to exist to be refinanced, and every heir who is being bought out has to sign.
What Is a VA Cash-Out Buyout, Really?
It is a cash-out refinance used for a family purpose. The loan replaces whatever mortgage is on the home, and the extra proceeds go to the heirs who are giving up their shares. Nothing in the VA program is labeled “heir buyout,” and the rules treat the file like any other cash-out.
Across the wholesale programs Lendmire places VA files with, the structure looks like this. The veteran occupies the home. The new loan can reach 100% of the appraised value, including the financed funding fee. There is no mortgage insurance and no VA loan limit when the veteran has full entitlement. The score floor on the wholesale side starts at a 580 decision score. Residual income, not a flat debt ratio, controls the underwriting. All of this is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
The hub page for the VA cash-out refinance program covers the program basics. This article focuses on the heir situation.
Can You Force an Heir to Sell?
No. A co-owner who inherited a share generally cannot be made to sell it to you. A lender and VA have no power to compel a sale either. Only two things move a refusing heir: a negotiated deal, or a court process.
| Situation | Who can do what |
|---|---|
| Estate still in probate | The personal representative controls actions; all must be on title before a loan |
| Heirs hold title together | Each co-owner has equal rights; no one can sell the whole alone |
| A co-owner files for partition | A court can order a division or a sale |
Partition is the lever that changes the conversation. Where the Uniform Partition of Heirs Property Act has been enacted, co-owners who do not want a sale get protections. A law firm summary of the California version describes notice, an appraisal, a right of first refusal, and a court-supervised sale only if no one buys. The American Bar Association explains that when one co-owner petitions for partition by sale, the others must be allowed to buy that petitioner out at a price reflecting the petitioner’s fractional value.
Two cautions. The act applies only in states that adopted it, and definitions and timelines vary. And a buyout right means little if the family has no cash, which is exactly where a cash-out loan can fill the gap. For legal questions, a local attorney is the right call. This is not legal advice.
Related reading: Lendmire’s piece Can Heirs Who Will Not Sell Get a HELOC on an Inherited Home? covers the other common funding route.
The Gate: A Lien Has to Exist
A VA cash-out is a refinance of existing debt. So the first question is simple: is there a mortgage on the home today?
- The decedent’s mortgage is still on the home. That loan is the lien being refinanced. This is the clean path.
- The home was inherited free and clear. A VA cash-out generally is not available, because there is nothing to refinance. A loan officer should confirm this against current VA guidance before you plan around it.
That second case is the most common surprise. If the house is paid off, the alternatives are a closed-end second, a HELOC, or a different program. Conventional guidelines carry a co-owner buyout concept, but that is a conventional rule and does not carry over to VA.
How the Loan Is Underwritten, Step by Step
1. Sort out title and ownership. The borrower should expect to be on title at closing and to occupy the home. Heirs who will not sell are co-owners, so the practical path is a written agreement to purchase their shares, with the deeds signed at closing. If probate is open, resolve it first.
2. Confirm the existing lien. Get a payoff statement. No lien, no VA cash-out.
3. Get the Certificate of Eligibility. VA’s COE decides eligibility. Service requirements are VA’s rules. Veterans, service members and eligible surviving spouses may qualify.
4. Order the VA appraisal. The appraised value caps the new loan at 100% of reasonable value, under 38 CFR § 36.4306. That cap includes the financed funding fee. The other heirs can get their own appraisal or agree on a value, but the VA number controls only the loan.
5. Full credit underwriting. Cash-out files get full underwriting. The borrower qualifies alone on income, credit and residual income. Residual income is the controlling test, and the 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
6. Pass the net tangible benefit test. More on this below.
7. Close. The payoff to the old lien and the payments to each heir flow through closing. Keep the signed buyout agreement and a release from every heir.
What decides the outcome comes down to five things: whether a lien exists, VA value versus what the heirs are owed, the buyer’s income and credit, whether every heir signs, and whether title is clear.
Pricing the Buyout (Percentages, Not Guesses)
Start with the appraised value. Subtract the existing mortgage payoff. What remains is the equity. Each heir’s share is their ownership percentage of that equity, adjusted for whatever the family negotiates. If three siblings own equal thirds and one keeps the house, the other two are each owed one-third of the equity.
Run it as a three-line check before anyone signs anything:
- Does the equity owed to the heirs, plus the old payoff, plus the financed funding fee, stay within 100% of the VA value?
- Does the buyer’s residual income support the larger loan?
- Do the heirs agree to the same value the VA appraisal produced?
The third one derails more files than the first two. Families often argue over value, selling-cost deductions and who pays carrying costs. When the VA appraisal comes in below the number the heirs want, the loan cannot stretch to cover it. The gap has to come out of the buyer’s cash or the negotiation.
Funding Fee and Leverage
The VA funding fee on a cash-out refinance is 2.15% for first use and 3.3% for subsequent use. It is reviewable, and it is waived for veterans receiving compensation for a service-connected disability and the other exempt groups. VA News explains who is exempt.
Because the fee rides inside the 100% ceiling, any amount that would push the loan above that line has to be paid in cash at closing. Leverage can reach 100% of the appraised value on the wholesale programs Lendmire works with. Some lenders set a lower cap, so the exact number depends on the lender and the file.
The Net Tangible Benefit Test
Every cash-out has to meet at least one of eight tests in the VA regulation. VA’s lender training materials confirm the same rule. Examples include a lower payment than the loan being refinanced, higher monthly residual income, or a new loan at or below 90% of reasonable value.
Here is the myth to drop. The 90% figure is not a ceiling. The Federal Register shows VA replaced the old 90% cap with 100% and kept 90% as one of the ways to pass the benefit test.
An inherited home can make this test awkward. If the old mortgage belonged to the decedent, there may be no prior payment of the veteran’s own to compare against. Raise this with the loan officer early. The lender also has to give a loan comparison covering payoff, loan type, term and total payments.
Where the General Rule Breaks
A free-and-clear home. Covered above. No lien, generally no VA cash-out.
Only some heirs are bought out. If other heirs stay on title, the file hits questions about occupancy, joint-loan rules and first-lien position. Whether that works depends on the specifics, and a loan officer should check before you commit to the plan.
The veteran is not on the existing loan. That is allowed in some cases. A surviving spouse who was not on the old loan can complete only a cash-out, upon qualifying as a surviving spouse, per VA’s buyer’s guide.
Occupancy. The veteran has to certify they will live in the home. A vacant house, rental or second home generally does not fit. If you are not planning to live there, occupancy decides the leverage and the program.
The IRRRL is not a buyout tool. The streamline refinance cannot take equity out or pay anyone but the VA loan being refinanced. If you want a small amount of cash, this comparison of VA IRRRL versus VA cash-out covers the two options.
Seasoning. The seasoning rule for the wholesale programs is the later of 210 days from the first payment and the 6th payment, and it applies to refinancing an existing VA loan. A net tangible benefit applies as well.
State law. Partition rules, appraisal rules and homestead limits vary by state. A local attorney should confirm what applies.
If the Heir Won’t Talk or Won’t Sign
Match the move to the type of refusal.
| Refusal type | Likely move |
|---|---|
| Won’t engage | Written offer with an appraisal attached; mediation |
| Wants more money | Negotiate off an agreed appraisal; reconcile with the VA value |
| Wants to keep the house | Compare buyout offers; consider partition rights |
| Unreachable or incapacitated | Attorney needed; a court process may be the only path |
No loan can close without the signed deed from each heir who gives up a share. So the legal track and the loan track run side by side. A voluntary deal needs the signature first. A partition buyout produces a court-set price that a lender can work from, if the paperwork documents it.
What the Lender Wants to See
- Evidence of title and probate status
- The signed buyout agreement or court order
- A payoff statement for the existing lien
- The VA appraisal and COE
- Income, credit and residual income documentation for the borrower
When a VA Cash-Out Is the Wrong Tool
| Route | Fits when |
|---|---|
| VA cash-out | Veteran-heir occupies; a lien exists; income supports the new loan |
| HELOC or second lien | Home is free and clear, or the current loan should stay in place |
| Conventional cash-out | Veteran is not eligible or the home has no lien |
| Intra-family loan | Heirs agree and the family can carry the debt |
For a veteran who already holds a HELOC, it is worth weighing a VA cash-out refinance against keeping the second lien. A cash-out can also extend the payoff time, and the payment may rise because the new loan is larger, as the CFPB’s home equity guide notes. The home secures the loan, so missed payments can mean foreclosure.
Key Terms Defined
Tenants in common: Co-owners who each hold a share of the same property and can each pass that share on.
Partition: A court process that divides jointly owned property or orders it sold.
Reasonable value: The VA appraised value that caps the new loan.
Net tangible benefit: A test showing the refinance helps the borrower in at least one defined way.
Residual income: The money left each month after major obligations, which is the controlling VA test.
Certificate of Eligibility: The VA document showing the borrower qualifies for the program.
Taxes
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. The same goes for heirs being bought out.
Frequently Asked Questions
Can I buy out an heir who refuses to sell?
Only by agreement or through a court process. Nobody can force a co-owner to sell their share to you. A negotiated price, backed by an appraisal and a written agreement, is the usual route. Where partition law gives co-owners a buyout right, a court-set price can become the number the loan is built around.
Can a co-heir stop a VA refinance?
Effectively, yes, if their share is part of the plan. Any heir being bought out must sign a deed at closing. If they will not, the loan cannot close on that basis. The co-heir cannot block you from refinancing your own loan, but cannot be bought out without consent unless a court orders it.
Does an inherited home with no mortgage work for a VA cash-out?
Generally not. A VA cash-out refinances an existing lien, so a paid-off home gives it nothing to replace. A closed-end second or HELOC may be the better fit, and a loan officer can confirm current VA guidance for your file.
What if the heir lives in the house?
Living there does not give them a right to stop the process, and they still hold an equal share. But a buyout usually requires them to move or agree to terms, and the veteran must occupy the home for a cash-out. Mediation or partition may come into play.
Does the VA appraisal decide what the heirs are paid?
No. The appraisal caps the loan at 100% of reasonable value. The heirs’ price is negotiated or set by a court. If the two numbers differ, the gap has to be closed in the family negotiation or with the buyer’s own cash.
Next Step
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Hoge Fenton, California UPHPA adoption
2. American Bar Association: Uniform Partition of Heirs Property Act
4. VA News: Funding Fee, Who Pays and Who Is Exempt
5. VA Loan Guaranty Conference: Refinancing Loans
6. Federal Register, VA Cash-Out Refinance Final Rule
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: VA Cash-Out Occupancy Requirements on an Existing VA Loan · Can a Veteran With a VA Loan Use VA Cash-Out to Buy After a PCS? · How to Use a VA Cash-Out With Partial or Restored Entitlement
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.