The Quick Read: The appraisal sets a ceiling, and your new loan is measured against it. The VA appraisal produces a figure called “reasonable value,” and the new loan can reach up to 100% of that number. The VA funding fee, if you finance it, sits inside that ceiling, not on top of it. Your cash is whatever is left after the old loan, the fee, and costs come out.
Key Takeaways
- The appraised “reasonable value” decides your equity, not your purchase price and not an online estimate.
- The ceiling is 100% of that value, and a financed funding fee counts inside it.
- Cash in hand equals the ceiling minus your payoff, the financed fee, and closing costs.
- A low appraisal shrinks the cash, and it can erase it.
- The home must be your primary residence.
The appraisal is the number every other figure is measured against. Once it is set, the rest is arithmetic.
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.
What Does “Equity” Mean on a VA Cash-Out?
Equity is the gap between what your home is worth and what you owe. On a VA cash-out, “worth” has a specific meaning: the value on the VA appraisal.
Many homeowners calculate equity from what they paid, or from a listing-site estimate. Neither one counts here. The lender orders a VA appraisal, and the VA-assigned appraiser’s work is reviewed and turned into a Notice of Value, or NOV. VA’s definition of that term is the figure a qualified, unbiased appraiser would recommend to a buyer as a proper price in light of prevailing conditions.
So your equity is the NOV value minus your current payoff. Nothing else enters that first step.
A quick word on who does what. You do not borrow from VA. Per VA’s cash-out refinance page, a private lender makes the loan, and VA guarantees part of it. Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders. It does not lend. Lendmire’s VA cash-out refinance program page lays out the program basics.
How Much of the Appraised Value Can You Borrow?
You can borrow up to 100% of the appraised reasonable value, with the financed funding fee included in that total. That is the federal ceiling, and it applies to the whole new loan, not just the cash portion.
The rule sits in 38 CFR 36.4306, which caps the loan at 100 percent of reasonable value. The VA Lenders Handbook, Chapter 6 repeats it. It adds that closing costs, including the funding fee, can be paid from loan proceeds as long as the total stays under the maximum. The same handbook notes there is no dollar cap on VA loans as such, which applies to borrowers with full entitlement. Separately, the wholesale programs Lendmire places VA files with set their own top amount of $4,000,000 for full-entitlement loans, subject to lender guidelines and full file review.
Notice what “100% of value” is not. It is not 100% of your equity. If you owe 60% of the value, you do not get to pull out 100% of anything beyond the 40% gap. You get the gap, minus costs.
The cap used to be lower. A 2018 rule change, explained in the Federal Register notice, moved it from 90% to 100%. That is why you still see “90%” in older articles and on some lender pages.
How Does the Math Run From Appraisal to Cash?
The cash you receive is the ceiling minus four things: your payoff, the financed funding fee, other fees and escrow items, and closing costs. Work it in that order and the picture gets clear.
Here is the sequence a lender follows:
1. The NOV sets reasonable value. 2. Take 100% of that value. That is the maximum new loan. 3. Subtract the payoff of the loan being refinanced, plus any other liens. 4. Subtract the financed funding fee. 5. Subtract closing costs, escrow shortages, and prorated interest you choose to roll in. 6. What remains is your cash.
VA Circular 26-19-05 says the lender compares the payoff, plus fees, escrow shortages and prorated interest, against the NOV value to find the equity being removed. The same circular says LTV is the total loan, funding fee included, divided by the reasonable value.
Run it with percentages. Say the NOV matches your expectations and you owe 55% of the value. The ceiling leaves a 45% gap. The financed funding fee comes out of that gap, and so do closing costs. Your cash is the remainder.
Now say you owe 85%. The gap is 15%. After the fee and costs, little may be left. The loan could still make sense as a refinance into VA, but as a cash-out it may do very little.
What Does the Funding Fee Do to Your Equity?
The funding fee uses up room under the ceiling when you finance it. A cash-out refinance carries a fee of 2.15% on first use and 3.3% on later use, and it is waived for veterans receiving compensation for a service-connected disability and the other exempt groups.
The fee applies to the entire new loan amount, not just the cash. Larger down payment tiers do not apply here, because there is no down payment on a refinance. VA Circular 26-23-06 lists the same refinance rates and says reduced rates for larger down payments do not apply to refinances.
A common mistake is treating 100% as the number before fees. It is not. Finance the fee and it sits inside the 100%. Pay it in cash at closing and it stays outside the loan. That is a real trade: cash out of pocket now, or less cash from the loan.
Exempt veterans skip the line entirely, and that can add real room under the ceiling. The VA certificate of eligibility, or COE, tells you where you stand.
What If the Appraisal Comes In Low?
A low appraisal lowers the ceiling dollar for dollar. Your payoff does not change, so the shortfall comes straight out of your cash.
You have two tools, and they are not magic. The first is a pre-final step called a Tidewater review, where the appraiser allows two business days for additional sales data. VA’s appraisal bulletin describes it. The appraiser does not have to change the value. Tidewater is also described in VA guidance mainly as a purchase tool, so do not count on it for a refinance.
The second is a Reconsideration of Value, or ROV. It happens after the NOV is issued. VA staff review the request within five business days, and if the market supports a higher value, VA issues an amended NOV. You need real evidence, such as better comparable sales. Feelings about your kitchen do not count.
If the value stays low, you have three choices:
- Take a smaller cash-out.
- Skip the cash and refinance only the existing balance.
- Wait and try again later.
The over-the-ceiling case is stricter. VA will not guaranty a refinance above 100% LTV, per Circular 26-18-30. If you choose to close anyway, you pay the excess at closing. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Where Does the Old “90%” Figure Come From?
The 90% figure survives in two places, and neither is a general cap. One is a net tangible benefit test. The other is a narrow adjustable-rate case.
First, the benefit test. Every VA cash-out needs a net tangible benefit, which means the refinance has to leave you better off in a way VA recognizes. That means one of VA’s eight listed benefits. A new loan at or below 90% of reasonable value is one way to meet the test, but it is not a limit on the loan.
Second, the fixed-to-adjustable swap. Under the handbook, if the loan being refinanced is fixed-rate, the new loan is adjustable, and more than one discount point is charged, the Type I loan is limited to 90% of reasonable value.
The half-percent rate-reduction and fee-recoupment tests are streamline rules. They do not apply to the VA cash-out.
Type I or Type II: Does It Change the Equity Calculation?
Yes, but only in labeling. Type I means the new loan is no larger than the payoff of the loan you are refinancing. Type II means the new loan is larger, so you take cash out. Both fall under the same 100% ceiling in 38 CFR 36.4306.
The practical difference is in the review. The lender must compare your payoff, fees, escrow shortage and prorated interest to the NOV value. That comparison tells VA how much equity you are removing.
For you, the takeaway is simple. If you want no cash, only a different structure, you are in Type I territory. If you want cash, you are in Type II. The appraisal governs both.
Where Does the General Rule Break?
Several situations bend the standard picture. Each one is a named edge case worth knowing before you apply.
- Non-VA loans. A VA cash-out can refinance a conventional or FHA loan into VA, with or without cash. The funding fee in that case is the cash-out rate.
- Interim construction loans. Refinancing a loan used to build, alter or repair the home is one of the listed paths to a net tangible benefit.
- Manufactured homes. The regulation has special provisions for refinancing existing manufactured-home purchase loans, including how entitlement is charged.
- Entitlement. The new loan’s guaranty is the entitlement already used on the old loan plus any additional available entitlement. Full entitlement is what allows no loan limit.
- Occupancy. You must live in the home. VA’s program is not available for cash-out on a rental or investment property. An IRRRL, the streamline, is a different product: it uses your existing VA balance and needs no VA appraisal.
- Seasoning. Across the programs Lendmire places, a VA cash-out needs the later of 210 days from your first payment and your sixth payment on the loan being refinanced.
- State rules. Some states limit cash-out amounts or apply homestead rules, and lender policy can restrict what is allowed.
Lender overlays matter too. A lender can set its own cap below VA’s 100%, and some tighten it for lower credit scores. VA sets no minimum credit score, and the wholesale programs Lendmire places VA loans with start at a 580 decision score. Lenders may set a higher floor.
How Does a Lender Decide You Can Carry the New Loan?
Equity gets you in the door. Residual income decides whether you can stay. Residual income is what is left of your monthly income after taxes, debts, and a set amount for living costs.
VA treats residual income as the controlling test. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it generally needs residual income well above the standard table. That is different from most conventional loans, and it can help or hurt depending on your family size and budget.
Your payment can move up or down on a cash-out, since the old loan is replaced entirely. Turning equity into cash creates debt you must repay, and a cash-out may extend how long the mortgage takes to pay off.
Borrowing near 100% leaves almost no cushion. If prices fall, you can owe more than the home is worth. Think about that before using every available dollar.
How Does a Cash-Out Compare With Other Options?
The right tool depends on whether you need cash, a lower cost, or both. Here is a side-by-side view.
| Factor | VA Cash-Out | IRRRL (Streamline) | Home Equity Loan |
|---|---|---|---|
| Appraisal | VA appraisal | None | Lender appraisal |
| Max vs. value | Up to 100% | Existing VA balance | Lender-set |
| Takes cash out | Yes | No | Yes |
| Funding fee | 2.15% / 3.3% | 0.5% | No VA funding fee |
| Replaces first loan | Yes | Yes | No |
The VA funding fee applies only to VA loans, so a home equity loan has no such fee, though it may carry other costs. A second loan leaves your first mortgage alone, which matters if the loan you have is one you want to keep.
How Should You Prepare for the Appraisal?
You cannot choose the appraiser, but you can shape what the appraiser sees. These steps help, and none costs much.
1. Gather a list of recent upgrades with dates, such as a new roof, HVAC or kitchen work.
2. Fix visible safety and condition issues. VA appraisals check minimum property standards.
3. Pull three to five recent nearby sales you believe are comparable. You may need them for an ROV.
4. Clean the home and clear access to the attic, crawlspace and utilities.
5. Get your payoff figure so you can estimate cash before the value comes back.
6. Check your COE and funding fee status first.
Frequently Asked Questions
Is a VA cash-out refinance capped at 90% of my home’s value?
No. The federal ceiling is 100% of reasonable value. The 90% figure remains in one net tangible benefit test and in the fixed-to-adjustable case. Individual lenders may still set lower caps as policy, so the amount you can reach depends on the lender and your file.
Does the funding fee come on top of the 100%?
No. A financed funding fee counts inside the 100% ceiling. Your total loan, fee included, divided by the reasonable value gives the LTV. If you pay the fee in cash at closing instead, it stays outside the loan.
Can I use a VA cash-out if my current loan isn’t a VA loan?
Yes. VA’s program can refinance a non-VA loan into a VA-backed loan, with or without cash. You need a COE and you must live in the home. The funding fee is the cash-out rate in that case.
What if my appraisal comes in lower than I expected?
Your ceiling drops and so does your cash. You can ask for a Reconsideration of Value with better comparable sales. If the value holds, you can take a smaller cash-out or refinance without cash. Qualification stays subject to lender guidelines and full file review.
Do I need a VA appraisal for every VA refinance?
No. The IRRRL, or streamline, needs no VA appraisal because it works from your existing VA loan balance. A cash-out needs one, since the appraised value sets the ceiling.
Key Terms Defined
Reasonable value: The figure on the VA appraisal that a qualified, unbiased appraiser would recommend as a proper price for the home.
Notice of Value (NOV): The VA document that states the reasonable value and sets the ceiling for your loan.
Loan-to-value (LTV): The total new loan, including a financed funding fee, divided by the reasonable value.
Funding fee: A one-time VA charge that can be financed into the loan and is waived for exempt veterans.
Entitlement: The amount of guaranty VA provides to the lender on your loan.
Residual income: Monthly income left after taxes, debts and living costs, which is VA’s controlling underwriting test.
Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend. Reach the team at 828-256-2183 or request a quote.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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
2. VA, Cash-out refinance loan
4. VA Lenders Handbook, Chapter 6
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 Qualify and Apply for a VA Cash-Out Refinance to Tap Home Equity · How to Get a VA Cash-Out Refinance With an Unpermitted Addition · How Much a VA Appraisal Value Caps a Cash-Out Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.