The Quick Read: The VA cash-out funding fee follows your use history, not how much entitlement you have left. If you have used a VA loan before, the subsequent-use tier applies, whether your entitlement is partial, fully restored, or restored one time. Entitlement status decides how much the VA guaranty can support. It does not move you back to the first-use fee.
Key Takeaways
- Fee tier = first use or subsequent use. For a cash-out refinance, the first-use figure is 2.15% and the subsequent-use figure is 3.3%.
- Restoring entitlement brings back guaranty capacity. It does not reset you to first use.
- A cash-out has no down payment, so the reduced 1.5% and 1.25% down-payment tiers do not help you here.
- The fee can be financed, but the total loan still has to stay within 100% of the appraised value.
- A disability-compensation exemption can erase the fee no matter what your use history says.
How the Cash-Out Fee Tier Gets Decided
The tier comes from one question: has this veteran obtained a VA-backed loan before? VA describes the funding fee as a one-time payment on a VA-backed or VA direct home loan, and its rate depends on first versus later use. A VA circular exhibit on loan fees shows the cash-out refinance fee at 2.15% for first use and 3.3% for subsequent use. VA News describes the same pattern: typically 2.15% the first time, up to 3.3% after.
Across the wholesale programs Lendmire places VA files with, the same figures apply to a cash-out. The fee is a percentage of the loan amount, not the purchase price or the value of the home. Those figures are subject to lender guidelines and full file review.
The statute backs this up. Federal law defines a “subsequent loan” as a loan, other than an interest rate reduction refinance, to a veteran who previously obtained a VA-guaranteed or direct loan. It says nothing about how much entitlement remains.
One more point on tiers. A refinance of a loan that is not a VA loan into a VA cash-out counts as a cash-out for fee purposes. If you used your VA benefit on an earlier home, the higher tier applies even though the loan being paid off is conventional or FHA. For the program itself, see Lendmire’s VA cash-out refinance program page.
What Is Entitlement, and Why Does It Not Set the Fee?
Entitlement is the amount VA guarantees to the lender. It protects the lender if the loan defaults, which is why a VA loan can run without a down payment or mortgage insurance. The fee is a separate charge that funds the program.
With full entitlement, bonus entitlement usually covers 25% of the loan amount the lender is willing to make, and there is no VA loan limit. With partial entitlement, VA’s loan limits page explains that remaining bonus entitlement depends on the county loan limit, minus the entitlement already used. VA’s instruction is to multiply the county one-unit limit by.25 and then subtract what you have used. Lendmire does not quote county limits here, since they change by location. A loan officer can run the number for your county.
The two ideas sit side by side but do different jobs:
| Concept | What it controls | Does it change the fee tier? |
|---|---|---|
| Use history | First-use or subsequent-use fee | Yes |
| Full entitlement | Guaranty at 25% of loan, no VA loan limit | No |
| Partial entitlement | Guaranty tied to county limit and amount left | No |
| Restored entitlement | Guaranty capacity returns | No |
| Disability exemption | Fee waived | Yes, to zero |
A common mix-up is thinking full entitlement means a low fee. It means a larger guaranty. A veteran with full entitlement who used the benefit before still pays the subsequent-use rate.
Does Restoring Entitlement Reset the Fee Tier?
No. This is the most common misconception, and it is worth settling clearly because some web pages blur it.
The VA Lenders Handbook (VA Pamphlet 26-7) addresses this through the certificate of eligibility. An entitlement code of “5” on the COE means previously used entitlement has been restored, and the veteran must pay a subsequent-use funding fee on any future loan unless exempt. Restoration brings guaranty capacity back. The record that you used the benefit stays.
So three situations land in the same fee tier:
1. Partial entitlement. You still have some entitlement tied up in a prior loan. Fee: subsequent use.
2. Fully restored after payoff and sale. You sold the home, paid off the loan, and VA restored your entitlement. You have full entitlement again, with no county cap, but the fee is still subsequent use.
3. One-time restoration. You paid off the loan, kept the home, and VA restored your entitlement under its one-time rule. The fee is still subsequent use.
The handbook says one-time restoration can happen without disposing of the property, and that any future restoration generally requires disposal of all property obtained with a VA loan. That affects your guaranty planning. It does not change your fee.
A related myth: paying off a VA loan does not restore entitlement on its own. Restoration needs a request, and a lender can usually submit it through VA’s system. Without the request, the COE keeps showing the entitlement as used.
How a VA Cash-Out Is Underwritten, Step by Step
This is how a cash-out file typically moves through the process. Each step is subject to lender guidelines and full file review.
1. Certificate of eligibility. The lender pulls your COE. It shows entitlement charged to prior loans, any restoration code, and any exemption. VA’s Buyer’s Guide tells borrowers to check how much entitlement they have used, listed as “Entitlement Charged.”
2. Entitlement math. With full entitlement, the guaranty is 25% of the loan. With partial entitlement, the lender uses the county limit and what remains. The Buyer’s Guide says remaining entitlement multiplied by four is the loan size VA can guarantee without a down payment. That is a guaranty ceiling. A lender may still want cash in or a smaller loan when a file leans on partial entitlement, and overlays differ, so this is the point to talk with a loan officer.
3. Appraisal and the 100% ceiling. Under 38 CFR 36.4306, the new loan cannot exceed 100% of the reasonable value VA determines. Lendmire’s wholesale programs reach 100% of the appraised value on a cash-out, including the financed fee. Any part of the fee that would push the loan past that line has to be paid in cash at closing.
4. Fee calculation. The fee is a percentage of the total loan amount. Because it is financed inside the loan, a higher tier either shrinks your cash out or grows the balance.
5. Net tangible benefit. The cash-out must pass a net tangible benefit test. Examples in the rule include a new loan at or below 90% of reasonable value, or refinancing an adjustable-rate mortgage into a fixed one. The programs Lendmire works with also apply seasoning to the existing loan, and the cash-out refinances any loan type into VA.
6. Underwriting the borrower. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table. The wholesale programs start at a 580 decision score, and lender floors vary.
7. Documents. Expect the COE, a payoff statement, the VA appraisal, income and credit documents, and a loan comparison disclosure.
Why a Bigger Equity Cushion Will Not Lower the Fee
The reduced fee tiers of 1.5% and 1.25% are written for purchase loans, where a borrower puts five or ten percent down. A cash-out has no down payment. Equity in the home does not act as one for fee purposes.
So a veteran with a great deal of equity pays the same cash-out tier as one with very little. The tier is 2.15% on first use and 3.3% after. What the equity changes is how much cash the loan can produce, and whether the 90% value test supplies the net tangible benefit.
Appraisal matters here in a practical way. A low appraisal lowers the maximum loan. The fee base grows only as far as the cap allows, and the financed fee competes with your cash for room under 100%.
Edge Cases Where the General Rule Bends
Same-property prior loan. The handbook says restored entitlement from a prior loan number is available only for the property that secured that loan, and that the new loan must be secured by the same property. If you cash out of a prior VA loan on the same home, that restoration code can matter. It still leaves the fee at the subsequent-use tier.
Exempt veterans. VA says the fee is waived for people receiving compensation for a service-connected disability, among other listed groups. Exemption can take the fee to zero regardless of use history. Confirm it on your COE or VA letter before you rely on a quote, since an exemption not recognized at closing can lead to a refund request later.
The interest rate reduction refinance. A VA-to-VA streamline is a different product. Its fee is 0.5% unless exempt, and it needs no VA appraisal and pays out no cash. It is not a cash-out, so the cash-out tiers do not apply.
Reserve and National Guard. Older, higher fee rates for these groups have been equalized for newer loans. Check the service category on your COE rather than assuming.
Manufactured-home-only prior use. Some websites claim a veteran whose only prior VA loan was for a manufactured home pays the first-use rate. Lendmire has not verified that in primary VA text, so treat it as unconfirmed and ask for a written answer from VA or your lender.
Occupancy. VA loans are for a primary residence, and a cash-out refinance is meant for the home you live in. A rental or second home is a different conversation, and occupancy decides leverage.
What Financing the Fee Does to Your Cash
VA lets you roll the fee into the loan or pay it at closing. As VA News puts it, the fee can be included in the total loan amount, with the payment calculated on that. That raises the balance and the interest paid over time.
Think of net cash as the new loan, minus the payoff, minus any other liens, minus closing costs and the fee. Run that for a first-use veteran and a subsequent-use veteran borrowing the same percentage of value. The subsequent-use veteran nets less, because the fee base takes a larger bite. Or the balance ends up larger for the same cash.
The squeeze gets sharper at the cap. A veteran borrowing right up to 100% of value has no room left to finance the fee. The part over the line must be paid in cash. Borrowing a little under the ceiling is one way to keep the fee financed.
Which Situation Are You In?
A decision guide for four common profiles. Each one is subject to lender guidelines and full file review.
| Profile | Fee tier | Guaranty |
|---|---|---|
| Never used VA, cashing out a conventional loan | First use, 2.15% | Full entitlement |
| Used VA before, still holding that home | Subsequent use, 3.3% | Partial, based on the county limit |
| Sold the prior home, entitlement restored | Subsequent use, 3.3% | Full again |
| One-time restoration, kept the prior home | Subsequent use, 3.3% | Restored per COE |
Three questions sort most files. Have you used a VA loan before? What does your COE show for entitlement charged and any restoration code? Do you receive disability compensation? Those answers fix the tier and the guaranty before anyone talks about cash.
Mistakes to Avoid
- Assuming restoration resets you to the first-use fee.
- Expecting a down payment tier to apply to a cash-out.
- Quoting a net-cash number before confirming exemption status on the COE.
- Treating full entitlement as a sign of a low fee.
- Borrowing right to 100% and forgetting the fee must fit under the cap.
- Assuming a payoff automatically restores entitlement without a request.
Key Terms Defined
Entitlement: the amount VA guarantees to a lender, which lets a VA loan run without a down payment or mortgage insurance.
Subsequent use: any later VA loan other than an interest rate reduction refinance, taken by a veteran who has obtained a VA loan before.
Restored entitlement: guaranty capacity that VA returns after a prior loan is paid off and the property is sold, or under the one-time rule.
Certificate of eligibility (COE): the VA document showing entitlement used, any restoration code, and any fee exemption.
Reasonable value: the appraised value VA sets, which caps the new loan at 100% on a cash-out.
Net tangible benefit: a test showing the cash-out helps the borrower, such as a loan at or below 90% of value or a move from adjustable to fixed.
Frequently Asked Questions
Does restoring my entitlement lower my cash-out funding fee?
No. Restoration brings back the VA guaranty, which matters for loan size. The fee follows use history, and a restored entitlement code on your COE means the subsequent-use fee applies on any future loan unless you are exempt.
Can I get the first-use fee on a cash-out if I only have partial entitlement?
Only if you have never used a VA loan, which would mean you do not have partial entitlement from a prior loan. If prior entitlement is tied up in an earlier VA loan, you have used the benefit, and the 3.3% subsequent-use cash-out tier applies unless you are exempt.
Will a larger down payment or more equity reduce the fee?
No on a cash-out. The 1.5% and 1.25% tiers apply to purchases with five or ten percent down. A cash-out has no down payment, so the fee is 2.15% for first use or 3.3% for subsequent use.
Can I roll the funding fee into the loan?
Yes, within the 100% of appraised value ceiling. If the fee would push the loan past that line, the excess must be paid in cash at closing. Financing it raises your balance, so it reduces the cash you walk away with or increases what you owe.
Does a disability rating change the fee?
It can erase it. Veterans receiving VA compensation for a service-connected disability are exempt, along with certain other groups listed on VA’s site. Confirm the exemption appears on your COE or VA letter before closing.
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. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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. VA funding fee and closing costs
2. VA Circular 26-23-06 Exhibit B
3. VA News: funding fee, who pays and who is exempt
4. VA home loan entitlement and limits
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 vs Conventional With Partial or Restored Entitlement · Can You Use VA Cash-Out for the Next Home on Partial Entitlement? · Is a VA Cash-Out Worth It When the Subsequent-Use Funding Fee Applies?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.