The Quick Read: A VA cash-out refinance can reach 100% of the home’s VA-determined value, but you never receive 100% of your equity. The financed funding fee sits inside that cap, and the payoff of your current mortgage and any closing costs paid from proceeds come off first. What is left is your cash. Lender guidelines and the appraisal set the final number.
Key Takeaways
- The ceiling is 100% of VA reasonable value, and the funding fee counts inside it, not on top.
- Cash equals the new loan, minus your payoff, minus costs paid from proceeds.
- A first-use cash-out carries a 2.15% fee; later use carries 3.3%. Exempt veterans pay none, so more of the cap becomes cash.
- At full value there is no equity cushion left if prices fall.
What “Full Value” Actually Means
Full value means the new loan can be as large as 100% of the value the VA appraiser sets. Under 38 CFR 36.4306, the new loan may not exceed 100 percent of the reasonable value of the home that secures it. The VA appraisal documents that value on a Notice of Value. Your estimate of what the house is worth does not set the ceiling. The appraiser’s figure does.
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: 7.32% as of October 22, 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.
Across the wholesale programs Lendmire places VA files with, the VA cash-out reaches that 100% mark, includes the financed fee inside it, and refinances any loan type into a VA loan. The loan you are paying off does not have to be a VA loan. Conventional, FHA, or an older VA loan all qualify as the payoff. Lendmire is a mortgage broker, so lender guidelines and full file review decide whether a given file reaches the cap.
One old idea needs retiring. You may hear that VA lets you borrow 100% plus the funding fee. That framing is outdated. The current rule puts the fee inside the 100%.
The Net-Cash Formula
Your cash is simple to state:
New loan amount, minus the payoff of your existing mortgage and any liens being retired, minus closing costs paid from proceeds.
Each piece matters.
- New loan amount. At the cap, this is 100% of reasonable value, with any financed funding fee included.
- Payoff. This covers your current balance, any second liens you retire, and interest accrued up to the payoff date. It is rarely the exact balance on your last statement.
- Costs from proceeds. VA’s own consumer guidance notes that allowable fees and costs can often be paid from loan proceeds. That can reduce or eliminate cash due at closing. It also reduces the cash you walk away with.
So “equity on paper” and “cash in hand” are different numbers. Think of it as a waterfall. Value sets the top. Payoff, the fee and costs drain off the sides. Cash is what pools at the bottom.
How the Funding Fee Eats Into Your Cash
The fee is a percentage of the loan, and the loan includes the fee. That circularity is why the fee reduces cash dollar for dollar at the cap.
Per VA.gov, a cash-out refinance carries a 2.15% fee on first use and 3.3% after first use. Down payment tiers that apply to purchases do not change this. For a cash-out, what matters is whether you have used the benefit before.
Here is how that plays out in plain terms at the same home value and the same payoff.
| Borrower type | Fee on cash-out | Effect at the cap |
|---|---|---|
| Exempt veteran | None | Most cash |
| First use, not exempt | 2.15% | Less cash |
| Later use, not exempt | 3.3% | Least cash |
Veterans receiving compensation for a service-connected disability, along with other exempt groups, have the fee waived. For them, the full cap is available for payoff, costs and cash. Your Certificate of Eligibility shows exemption status, and VA’s funding fee page lists the exempt groups.
What if the fee would push the loan above 100%? Under the official CFR text, any part of the fee that would exceed the cap must be paid in cash at closing. It cannot ride on top of the loan.
Same Home, Three Possible Outcomes
The federal cap is a ceiling, not a promise. Picture one home with one appraised value and one payoff. Three things can change what you actually receive.
1. The federal ceiling. The loan reaches 100% of reasonable value. This produces the most cash and leaves no equity.
2. A lender cap below the ceiling. VA sets the maximum. Individual lenders can set stricter limits through their own guidelines, sometimes tied to credit score. Some lenders stop short of 100%. Lendmire’s work with wholesale lenders shows this gap constantly. Ask any lender directly what loan-to-value it will actually deliver, not what VA allows.
3. State law. State rules for home equity borrowing can lower the ceiling in some places. Ask about it if you live somewhere with special homestead rules. Do not assume the federal figure applies untouched.
Reconciling “VA allows 100%” with “my lender offered less” comes down to this: VA is the outer limit, and everything else is a lender or state choice layered on top.
What Moves Your Number
Four inputs drive the cash more than anything else.
The appraisal. A few percentage points of appraised value can swing your cash by a large amount, because the cap is a percentage of that figure and your payoff stays fixed. If the value comes in low, you can scale back the loan, request a Reconsideration of Value, or bring cash to closing to cover the gap.
The payoff. Accrued interest and any second liens make the real payoff larger than the balance you remember. An escrow refund can partly offset it.
The funding fee. First use, later use or exempt: this is the biggest controllable swing on a cap-level loan.
Costs paid from proceeds. Whatever the Loan Estimate shows, paid from the loan rather than out of pocket, comes off your cash.
When the Cap Yields Little Cash
The cap only helps if equity exists. Suppose you owe a large share of the home’s value. Subtract the payoff, the fee and the costs from a ceiling that sits near your balance, and the remainder may be small or nothing. In that case the refinance may not make sense for cash purposes at all.
Also weigh what a larger loan does. A bigger balance generally means a higher monthly payment than a rate-and-term refinance would carry. A financed fee adds to the balance and the interest paid over time. And at 100% of value, you have no cushion if prices fall. If the market slips, you could owe more than the home is worth. That risk is real, and it belongs in the decision.
How It Compares With a Conventional Cash-Out
The structural difference is leverage. VA’s cash-out reaches 100% of value on a primary residence, with no monthly mortgage insurance on VA loans. A conventional cash-out generally stops well short of full value, so the same home usually releases less cash. The VA cash-out is also a full-underwriting loan, not a streamline.
Who Can Reach the Cap
A few conditions decide eligibility. Lender guidelines and full file review apply to all of them.
- Certificate of Eligibility. VA’s COE decides eligibility, and VA sets the service requirements.
- Primary residence. The home must be the one you own and occupy.
- VA appraisal. A VA-assigned appraisal sets the value.
- Credit and income. The wholesale programs Lendmire works with start at a 580 decision score, though some lenders set higher floors. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap, but a higher ratio needs residual income well above the table.
- Net tangible benefit. The new loan must be in your financial interest. Your lender must give you a net tangible benefit test and a loan comparison covering payoff, loan type, term and total cost across both loans.
- Seasoning. If you are refinancing an existing VA loan, the wait is the later of 210 days from your first payment and your sixth payment made.
Not a streamline. Full underwriting applies. The Interest Rate Reduction Refinance Loan, or IRRRL, is a different product that only refinances an existing VA loan.
Type I vs. Type II
A cash-out refinance can be one of two types. In a Type I, the new loan does not exceed the payoff of the loan being replaced, so no equity comes out as cash. In a Type II, you take cash. The 36-month recoupment test, which requires fees and costs to be scheduled for recovery within 36 months, is tied to the Type I case.
Key Terms Defined
Reasonable value: The figure a qualified, unbiased VA appraiser recommends as a proper price under current conditions.
Notice of Value (NOV): The VA document that records the appraised value and sets the benchmark for your ceiling.
Funding fee: A one-time VA charge that can be financed into the loan and is waived for exempt veterans.
Net tangible benefit: A test showing the new loan serves the borrower’s financial interest.
Residual income: The money left each month after major obligations, which VA uses as the controlling underwriting test.
Estimate Your Own Number
Gather these before you talk to a loan officer:
1. Your current payoff, including accrued interest and any second liens.
2. Your Certificate of Eligibility, with exemption status.
3. Your best sense of the home’s value, knowing the VA appraiser’s figure controls.
4. A list of the costs your Loan Estimate shows.
Then ask three questions. What loan-to-value will you actually deliver? Is my fee exempt, first use or later use? And if the appraisal comes in low, what are my options?
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. You can start with the VA cash-out refinance program page. For a related angle, Lendmire’s piece How Much Equity to Keep on a VA Cash-Out at the Full Value Cap covers the cushion question in more depth.
Frequently Asked Questions
Can I take out all of my equity with a VA cash-out refinance?
No. The cap is 100% of VA-determined value, but your payoff, the financed funding fee and any costs paid from proceeds all come off first. What remains is your cash. A lender may also set a limit below the federal ceiling.
Does the funding fee come out of my cash?
Yes, when it is financed. The fee sits inside the 100% cap, so every dollar of fee reduces the cash available. Exempt veterans, such as those receiving compensation for a service-connected disability, do not owe the fee.
Do I need a VA loan now to do a VA cash-out?
No. The loan being paid off can be any type. A VA cash-out can refinance a conventional or FHA mortgage into a VA loan. If you are refinancing an existing VA loan, the seasoning rule applies: the later of 210 days from your first payment and the sixth payment made.
What can I use the cash for?
VA’s cash-out is not restricted to one purpose. Many borrowers use it for debt payoff or home improvements, but the net tangible benefit test must still show the new loan serves your financial interest. A lender can explain how your plan fits that test.
What happens if the appraisal comes in low?
The ceiling drops with the value, so your cash shrinks. You can scale back the loan, ask for a Reconsideration of Value, or pay the difference in cash at closing. Because the appraiser’s figure sets the cap, even a small change in value can noticeably move the final amount.
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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References
2. VA News, You could be losing thousands on your home loan
3. VA.gov, Funding fee and closing costs
4. GovInfo, 38 CFR 36.4306 (CFR edition)
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: Is a VA Cash-Out Refinance Type II Worth It Over Type I? · VA Cash-Out Refinance Full-Value Requirements for Veterans · Can You Get a VA Cash-Out Refinance After Moving Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.