The Quick Read: A VA cash-out refinance can reach 100% of the home’s appraised value, and the financed funding fee counts inside that cap. The value that matters is the one the VA appraiser sets, not what you paid or what an online estimate says. Lower limits you may hear about are usually lender policy rather than VA rules, and a loan can sit under the cap and still fail a separate benefit test.
Here is how that works, start to finish.
Key Takeaways
- The cap is 100% of the VA-appraised “reasonable value,” and the financed funding fee sits inside it.
- Full value does not mean you receive the full value in cash. The loan first pays off what you owe.
- A lender may stop below 100% by choice. That is an overlay, not a VA rule.
- Under the cap is not the same as approved. The loan must also show a net benefit to you.
- Because you finish with almost no equity cushion, the decision deserves more than a glance at the maximum.
What Does “Full Value” Actually Mean?
Full value means the new loan, fee included, can equal 100% of the appraised value and no more. The appraiser’s number on the VA Notice of Value is the denominator. Your purchase price is not. A tax assessment, a listing estimate, or an app’s guess is not either.
The arithmetic is simple. Take the total new loan, including any funding fee you finance. Divide it by the appraised value. The answer must be 100% or less.
Across the wholesale programs Lendmire places VA loans with, this is the ceiling for a VA cash-out. The same programs offer no mortgage insurance, and on full entitlement they carry no VA loan limit. (If your entitlement is partly used, the picture changes, and that gets its own section below.) You can read the program overview on Lendmire’s VA cash-out refinance program page.
A VA cash-out also refinances any loan type into a VA loan. Your current mortgage can be conventional, FHA, USDA, or VA. The home must be one you occupy. Rentals and second homes sit outside this program, and occupancy decides the leverage.
How the Funding Fee Fits Inside the Cap
The funding fee is a one-time VA charge that can be financed into the loan. On a cash-out refinance it is 2.15% for first use and 3.3% for later use. Veterans who receive compensation for a service-connected disability, and the other exempt groups, owe none. Confirm your status on your Certificate of Eligibility.
Here is the part that trips people up. VA Circular 26-19-05 says VA no longer guarantees a refinance above 100% of value, and a financed fee cannot push the loan past reasonable value. A companion notice, 26-18-30, says any amount over 100% must be paid in cash at closing.
Some web pages still say the fee can ride on top of the appraised value. Those pages are stale or wrong for refinances. Go by the VA circulars.
Because the fee is a percentage of the base loan, the base loan has to be a bit smaller than the cap to make room for it. Here is how that looks, using percentages of the appraised value only.
| Scenario | Fee on base loan | Largest base loan |
|---|---|---|
| First use, fee financed | 2.15% | About 97.9% of value |
| Later use, fee financed | 3.3% | About 96.8% of value |
| Exempt from the fee | None | Up to 100% of value |
The math behind row one: a base loan at 97.9% of value, plus 2.15% of itself, lands at 100%. Row two works the same way with 3.3%. Overshoot those numbers and the excess comes out of your pocket at closing.
Waived fee? Then the whole 100% is base loan. That is a real advantage of exempt status.
From Ceiling to Cash: The Formula
The cap limits the loan. It does not tell you what lands in your account. Cash to you is the new loan, minus the payoff of the old loan, minus closing costs, minus any funding fee you did not finance. Anything above the cap comes out too.
Picture a home whose payoff is 70% of the appraised value, with first-use fee financed. The largest base loan is about 97.9% of value. Subtract the 70% payoff and you have roughly 27.9% of value before closing costs. Costs reduce that further. The 100% cap is the ceiling, and the cash is what remains after everything else.
Full value is not full cash.
If a loan officer quotes you a number, ask for the line-by-line version. Your Loan Estimate and Closing Disclosure show every piece of that formula.
Rule or Overlay? How to Tell Which Limit You Hit
VA sets one ceiling. Individual lenders may set a lower one. A lender can choose a tighter cap, a higher credit requirement, or a minimum loan size. Those are business decisions, and VA does not require them. Some lenders stop well below full value. Some want higher scores to go higher. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
| Question | VA rule | Lender overlay |
|---|---|---|
| Who sets it? | VA | The lender or its investor |
| Does it apply everywhere? | Yes, to VA-guaranteed loans | Only that lender’s loans |
| Can another lender differ? | No | Yes |
| What’s the fix? | Change the plan | Ask another lender |
A quick diagnostic: if a lender says you cannot go above a number below 100%, ask whether that is a VA requirement or its own policy. If it is policy, a different lender may see it differently. Lendmire is a broker, so it can place a file with wholesale lenders whose limits differ. Their guidelines still apply to your file, and nothing here is a commitment to lend.
The Second Test: Net Tangible Benefit
Staying under the cap is only the first gate. VA also requires that a refinance give you a real, demonstrable benefit. The circulars say these standards apply to cash-out refinances, and a loan must satisfy at least one of several listed tests.
One of those tests is a healthy cushion of equity. A loan at full value cannot use that one, by definition. So a full-value loan has to pass a different test. Examples a lender may look at include replacing a loan that carries mortgage insurance, shortening the term, or moving from an adjustable payment to a fixed one. VA also lists a test for paying off a short-term construction loan.
The point for you: a loan can sit under the cap and still fail. The cap measures how much. The benefit test asks why. Lenders must give you the benefit information early and again at closing, so you will see how your loan is judged.
Reduced Entitlement and the Guaranty Question
Entitlement is the amount VA is prepared to guarantee for you. With full entitlement, there is no VA loan limit. If you used part of your benefit before and still carry that loan, you may have reduced entitlement.
The 100% cap does not change. What can change is the guaranty underneath the loan. With partly used entitlement, a down payment may be required on a purchase, and the guaranty can shape how much a lender will do on a refinance. Specific figures depend on your file, so speak with a loan officer rather than guessing from a chart.
If this is your situation, Lendmire’s piece Can a Veteran With Reduced Entitlement Do a VA Cash-Out at Full Value? goes deeper.
Type I vs. Type II, and Extra Tests When Paying Off a VA Loan
VA sorts cash-outs into two types. In a Type I, the new loan, fee included, does not exceed the payoff of the loan being replaced. In a Type II, the new loan exceeds the payoff, so you receive cash. Most readers of this article are in Type II territory.
VA’s rule text lifts some statutory refinance standards for Type II, yet its circulars still say benefit standards apply to all cash-outs. The two statements need a careful read together. For planning, assume the benefit test applies, and let your loan officer confirm how it is handled on your file.
When the loan you are paying off is itself a VA loan, seasoning applies. A loan is seasoned once both conditions are met: 210 days have passed since the first payment, and you have made six monthly payments. The later of the two governs. VA Circular 26-19-22 states this statutory definition. A non-VA payoff does not carry the VA seasoning wait, though a lender may add its own rule.
An IRRRL, VA’s streamline refinance, cannot pay you cash from equity. Taking equity out makes it a cash-out refinance.
What Else Shrinks the Number?
The appraisal sets the ceiling. These things pull the real number down.
- Credit. VA sets no minimum score, yet the wholesale programs Lendmire works with start at a 580 decision score.
- Residual income. This is the controlling test. It measures what is left each month after your major obligations and living costs. The 41% debt-to-income figure is a guideline rather than a cap, and a higher ratio needs residual income well above the table.
- Payoff balance. A larger payoff leaves less for cash.
- Occupancy. The home must be your residence.
- State law. Some states limit how much equity a homeowner can borrow against a home, whatever VA allows. That is a state rule, not a VA one.
All of this is subject to lender guidelines and full file review.
What Happens If the Appraisal Comes In Low?
A low appraisal lowers the cap, and everything downstream shrinks with it. Since the ceiling is 100% of the appraised value, a lower value means a lower maximum loan, and the formula leaves less cash.
| Appraisal result | Effect on the loan | What you can do |
|---|---|---|
| Matches your estimate | Cap works as planned | Proceed |
| Somewhat lower | Maximum loan falls; cash shrinks | Take less cash, or bring cash to closing |
| Much lower | Cap may not cover the payoff plus the fee | Reconsider the refinance |
Sometimes a lower appraisal makes the refinance pointless. If the cap barely covers what you owe, you may be paying a funding fee to gain nothing. Ask your loan officer to run the numbers before you order the appraisal, and again after it comes back.
Where the Older “Different Cap” Idea Came From
Web pages disagree on this topic, and the reason is history. Before VA’s cash-out rule change, financed fees in some cases could sit on top of the value. VA now says its guaranty stops at 100% of reasonable value for refinances, fee included. Pages written before that change still circulate, and some lenders repeat them.
Add lender overlays and you get a messy picture. One page says 90%. Another says 100%. Both can be describing something real: one the VA cap, the other a lender’s choice. Check VA’s own circulars, and ask any lender whether a limit is policy or rule.
Cash-Out Math Versus Your Budget
At full value, nothing cushions you. If home values fall, you could owe more than the home is worth. That is why the question “can I borrow the max?” deserves a second question: “should I?”
A bigger balance also means a bigger payment, and a financed funding fee adds to the balance. Lenders must show you a comparison, and you should read it properly. The CFPB took action against a lender in a VA cash-out refinance case over comparisons that listed only principal and interest on the new loan, so it looked cheaper than the old one.
Be wary of pitches promising no waiting period, skipped payments, or no out-of-pocket costs. VA and the CFPB have jointly warned about offers that sound too good to be true. When a “no-cost” claim appears, remember the mechanics: the costs are built into the balance or the loan terms, not erased.
Lendmire’s explainer VA Cash-Out Funding Fee Rules for First or Subsequent Use covers how your fee tier is decided. VA’s funding fee page lists the cash-out rates and who is exempt. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
How This Compares With Other Cash-Out Options
Conventional and FHA cash-outs generally reach a lower share of value than VA. Here is the shape of the comparison.
| Feature | VA cash-out | Conventional or FHA cash-out |
|---|---|---|
| Reaches | Up to 100% of value | Lower share of value |
| Mortgage insurance | None | Often required |
| Upfront VA fee | Yes, unless exempt | Not applicable |
| Occupancy | Your residence | Varies by program |
The tradeoff is the funding fee against mortgage insurance, plus how much equity you want to keep. VA’s higher ceiling is a feature to use deliberately, not a number to chase.
Frequently Asked Questions
Can I borrow 100% of my home’s value plus the funding fee?
No. For a refinance, VA says the fee cannot push the loan above reasonable value, and anything over 100% must be paid in cash at closing. Your maximum base loan is a little under the cap to leave room for the fee, unless you are exempt.
Does “full value” mean I receive the whole value in cash?
No. The new loan first pays off your current mortgage. Closing costs and any unfinanced fee come out next. What remains is your cash.
Why did my lender quote a lower maximum than 100%?
Most likely an overlay, which is the lender’s own policy rather than a VA rule. Ask directly whether the limit comes from VA. A different lender’s guidelines may differ, and every file is subject to full review.
Can I do a VA cash-out right after buying with a VA loan?
Not necessarily. When you pay off a VA loan, seasoning applies: the later of 210 days from your first payment and your sixth monthly payment. Paying off a non-VA loan does not carry that VA wait, though a lender may set its own.
Does my entitlement affect the cap?
The cap stays at 100% of value. Partly used entitlement can change what the guaranty supports, so speak with a loan officer about your specific situation.
If You’re Weighing the 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. Start with your estimated payoff, your fee status, and a realistic view of the appraisal.
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.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
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
4. CFPB press release on misleading VA cash-out comparisons
5. VA News: funding fee, who pays, who is exempt
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: How Much Entitlement Remains After a VA Cash-Out at Full Value · How Much a Low VA Appraisal Cuts Your Cash at the Full-Value Cap · VA Cash-Out Refinance Without Tax Returns vs Full Documentation
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.