The Quick Read: Total cost on a VA cash-out is the funding fee, the closing costs, and the interest you pay on a larger balance, measured over the years you expect to keep the loan. The rate alone does not tell you that. Line up two or three Loan Estimates, put the financed funding fee in as a cost, and compare cash received against the new balance. The loan with the lowest advertised rate is not always a more affordable one.
Key Takeaways
- The VA cash-out funding fee is 2.15% on first use and 3.3% after first use, unless you are exempt. It does not shrink with more equity.
- The loan can reach 100% of the appraised value, and the financed fee sits inside that cap.
- Compare offers on fees, credits, cash received, and the new balance, not on the rate alone.
- The break-even and fee-recoupment tests that apply to a streamline do not apply to the VA cash-out.
- Every figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
What Does “Total Cost” Mean on a VA Cash-Out?
Total cost is everything you pay to get the new loan, plus everything the larger balance costs you over the time you hold it. Three layers make it up: the funding fee, the closing costs, and the interest on the new balance.
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.
A VA cash-out replaces your current loan with a new one. Per VA’s cash-out refinance page, you can use it to take equity out, or to refinance a non-VA loan into a VA-backed loan. The loan comes from a private lender, not from VA. The lender orders the appraisal.
A common mistake is comparing two offers by the interest line alone. A borrower picks the lower rate, and only later finds that the other offer carried fewer fees and a smaller balance. The comparison has to cover the whole stack.
Here is who sets each cost layer and whether you can shop it.
| Cost layer | Who sets it | Can you shop it? |
|---|---|---|
| Funding fee | VA | No |
| Lender origination charges | Lender | Yes |
| Appraisal | Lender orders it | Limited |
| Title and settlement services | Varies | Often yes |
| Prepaids and escrows | Set by the property | No |
| Lender credits | Lender | Yes |
| Interest on the new balance | Lender, by term and structure | Yes |
How Does the Funding Fee Work?
The VA cash-out funding fee is 2.15% on first use and 3.3% on later use, and VA states it does not change with the amount of equity you have. That is on VA’s funding fee and closing costs page.
Two points trip people up.
First, the reduced fee tiers for 5% or 10% down apply to purchases. They do not apply to a refinance. Putting more equity into a cash-out does not lower the fee. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Second, the fee is financeable. Rolling it into the loan means you pay nothing at the table for it, but the balance grows by that amount and you pay interest on it. That is a real cost, so it goes in your comparison as a cost.
Veterans who receive compensation for a service-connected disability, along with other exempt groups, do not pay the fee. If you are exempt, the fee line drops to zero and the comparison between offers gets simpler. A past manufactured-home-only VA loan still counts as first use for fee purposes.
How Is a VA Cash-Out Underwritten, Step by Step?
The lender runs full underwriting and a VA appraisal. Your costs are shaped at each step, so it helps to know the order.
1. Certificate of Eligibility (COE). VA’s test has two parts: you qualify for a COE, and you will live in the home you are refinancing. The COE can come through a lender, VA.gov, or by mail.
2. Loan type. VA’s rules split cash-outs into two types. Type I is a loan that, with the funding fee, does not exceed the payoff of the old loan. Type II exceeds the payoff, which means cash to you. VA Circular 26-19-05 defines both.
3. Credit, income, and residual income. VA does not set a minimum credit score, but lenders do. Across the wholesale programs Lendmire places VA loans with, the decision-score floor starts at 580. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap, and a ratio above it needs residual income well above the table.
4. Appraisal. The appraised value sets the ceiling. The VA cash-out reaches 100% of the appraised value, and the financed funding fee counts inside that number. A low appraisal means less cash, even if your Loan Estimate looked good.
5. Net tangible benefit. Every VA cash-out needs a net tangible benefit. The lender must give you a test showing how you benefit, as described in Chapter 6 of the VA Lenders Handbook. It is one of VA’s eight listed benefits, and it has to be documented in the file.
6. Loan Estimate and closing. You get a Loan Estimate, compare it, and later check the Closing Disclosure against the last Loan Estimate.
Lendmire’s VA cash-out refinance program page covers how the program is structured when Lendmire arranges it through its wholesale lenders.
How Do You Read Two Loan Estimates Side by Side?
Put the Loan Estimates in front of you and compare the same lines on each. The Consumer Financial Protection Bureau’s comparison guide points to these:
- Total monthly payment, including escrow
- Upfront loan costs, Section D
- Lender credits, Section J
- Lender-varying fees: Section A origination charges, Section B services you cannot shop, and credits
Then use its five-year method. On page 3 of the Loan Estimate, take the “In 5 years” total and subtract the principal figure. The result is five years of interest plus fees. Do that for each offer. It is the cleanest single number for comparing structures that trade rate for fees.
Watch three things people miss.
The funding fee line. If it is financed, it may not show as cash due. Find it anyway and write it in your worksheet.
Cash to close versus cash received. On a cash-out these are different numbers. Look at what actually lands in your account after the old loan is paid off and costs are settled.
Third-party versus lender lines. Lender charges are the ones that differ from offer to offer. Fees in the services-you-can-shop section may be the same across lenders or may not. Know which is which before you decide an offer is “cheaper.”
What Goes in Your Own Total-Cost Worksheet?
Build a simple worksheet, one column per offer. The structure is yours, not a VA rule, and it makes gaps obvious.
| Line | Offer A | Offer B |
|---|---|---|
| Closing costs, credits, prepaids | ||
| Funding fee (financed or exempt) | ||
| New loan balance vs. old payoff | ||
| Cash actually received | ||
| New term vs. remaining term | ||
| Five-year cost of borrowing |
Two lines here do the most work: the balance change and the term.
A longer term can lower the monthly payment while raising total interest paid. The monthly figure feels better. The lifetime figure is worse. The five-year line catches part of that. If you plan to keep the home longer than five years, think about the remaining years too.
What Does a Comparison Look Like in Practice?
Consider a veteran on first use of the benefit who wants cash from a home with substantial equity. Two offers arrive. One carries more lender charges and a lower interest line. The other carries fewer charges and a higher interest line.
The funding fee is the same on both, because VA sets it. So the funding fee does not separate them. What separates them is the lender origination charges, any credits, and the interest on the balance.
If the veteran plans to keep the loan for many years, the lower interest line may win even with higher upfront costs. If the veteran expects to sell or refinance again soon, the lower-fee offer may win. That is the break-even idea in plain terms: how long you hold the loan decides which structure costs less.
This is a comparison method, not a calculation. Run it with your real Loan Estimates, because the right answer changes with the term, the credits, and how long you stay.
Where Do the General Rules Break?
These are the edge cases that change how a file is structured.
VA-to-VA versus non-VA-to-VA. Seasoning applies when you refinance a VA loan into a cash-out. For a VA-to-VA loan, that means the first payment on the old loan was made 210 or more days before closing, among other conditions, per the circular. Across the wholesale programs Lendmire places, seasoning is the later of 210 days from the first payment and the 6th payment. Refinancing a non-VA loan into VA is allowed, and VA’s page confirms it. How seasoning and recoupment treat those loans should be confirmed against the handbook with your loan officer.
Fee recoupment is not a cash-out test. Recoupment, and the half-percent rate-reduction test, are streamline rules. The VA cash-out has a net tangible benefit instead. Mixing the two up leads borrowers to apply the wrong test to an offer. Lenders certifying fee recovery within 36 months applies to a narrow VA-to-VA Type I situation described in the circular, so ask your loan officer how it applies to your file.
FHA, USDA, or conventional into VA. A VA cash-out is the VA route for refinancing those loans into a VA-backed loan.
Streamline versus cash-out. The streamline, called an IRRRL, requires an existing VA loan and carries a 0.5% fee unless you are exempt. It uses no VA appraisal in the wholesale programs Lendmire works with. A cash-out carries a higher fee, a full appraisal, and full underwriting. If you do not need cash, the streamline is a different comparison entirely.
Lender overlays. One lender setting a higher credit floor or a lower value cap does not mean every lender does. Some lenders cap value below 100%, so ask each one directly.
Occupancy. VA cash-out loans are for a home you live in.
How Do You Weigh Cash-Out Against Other Options?
A VA cash-out carries no monthly mortgage insurance and no down payment, per VA’s cash-out page. That matters when you compare it with other cash-out products, because mortgage insurance is a recurring cost on many of them. Put it in your comparison as a line that is zero on VA.
Compare the same way: closing costs, the balance, cash received, and the term. A product with a lower upfront cost and a higher balance is not obviously cheaper. The worksheet works for any of them.
Key Terms Defined
Funding fee: A one-time VA fee on the loan, financeable into the balance, waived for exempt veterans.
Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit.
Net tangible benefit: A documented way the new loan benefits you, required on every VA cash-out.
Residual income: The money left each month after your major obligations and living costs, and the controlling test in VA underwriting.
Loan Estimate: The standard form that lists a loan’s costs, used to compare offers.
Seasoning: The required time and payment history on the current loan before it can be refinanced.
What Should You Check Before You Apply?
- Confirm your COE and whether this is your first use of the benefit.
- Ask whether you may be exempt from the funding fee.
- Request Loan Estimates from at least two lenders for the same loan amount and term.
- Fill in the worksheet, with the financed fee included as a cost.
- Ask each lender whether it caps value at 100% or lower.
- Ask how the net tangible benefit will be documented.
- Decide how long you expect to keep the loan.
Beware of offers that promise skipped payments or unusually low interest. VA warns that those claims can signal a misleading offer, on its IRRRL page.
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 a broader look at lining up offers, see Lendmire’s piece How to Compare Cash-Out Refinance Offers Before You Apply.
Frequently Asked Questions
Does more equity lower the VA cash-out funding fee?
No. VA states that refinance fee rates do not change with the amount of down payment or equity. The cash-out fee is 2.15% on first use and 3.3% after first use, unless you are exempt. The reduced tiers for 5% or 10% down apply to purchases only. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Can I roll the funding fee and closing costs into the loan?
The funding fee is financeable, and the financed fee sits inside the 100% value cap. Rolling costs in cuts what you pay at the table, but it raises the balance and the interest you pay on it. Count both when you compare offers.
Is the lowest interest line a more affordable VA cash-out?
Not always. Fees, credits, the balance, and the term all matter. The CFPB tells borrowers to compare fees, credits, and the five-year cost, not only the interest line. A lower line with higher upfront costs can lose if you sell or refinance soon.
Does the fee-recoupment test apply to a VA cash-out?
No. Recoupment and the half-percent rate-reduction test are streamline rules. A VA cash-out needs a documented net tangible benefit instead. Ask your loan officer which test applies to your file.
Does VA set a minimum credit score?
No. Lenders set their own, so a “no” from one is not a “no” everywhere. The wholesale programs Lendmire places VA loans with start at a 580 decision score, subject to lender guidelines and full file review.
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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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.gov: Funding fee and closing costs
4. VA Lenders Handbook (VAP26-7), Chapter 6
5. CFPB: Compare and negotiate your loan offers
6. VA
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 More Cash From a VA Cash-Out Than a Conventional Loan · VA Cash-Out Refinance vs Conventional Cash-Out on a Fourplex · VA Cash-Out Refinance vs Conventional Cash-Out Without an Escrow Account
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.