The Quick Read: You qualify by holding a VA certificate of eligibility, living in the home, and passing the lender’s credit, income, and residual income review. You apply through a private lender, and the lender orders a VA appraisal. The funding fee can be added to the new loan balance, which means you owe less cash at closing but carry a bigger balance. Every figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. You can take equity out as cash, or you can move a non-VA loan into a VA-backed loan. VA describes the product the same way: a new loan under different terms.
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.
Two things surprise people. First, the existing mortgage can be any type, because an existing VA loan is a requirement of the streamline refinance (the IRRRL), not of the cash-out. A cash-out can pay off a conventional, FHA, or VA first mortgage. Second, VA does not lend the money. A private bank, mortgage company, or credit union does.
Lendmire is a mortgage broker, not a lender. It arranges loans like this through wholesale lenders in the 16 states where it is licensed for consumer lending. Lendmire’s VA cash-out refinance program page lays out the basics if you want the overview first.
Key Terms Defined
- Certificate of eligibility (COE): The VA document that proves you earned the benefit. Your lender needs it.
- Funding fee: A one-time VA charge on the loan. It replaces monthly mortgage insurance, which this program does not have.
- Loan-to-value (LTV): The new loan balance divided by the home’s appraised value.
- Reasonable value: The value the VA appraisal sets. Your LTV is measured against it.
- Seasoning: The waiting period before you can refinance a loan you recently took out.
- Net tangible benefit: VA’s test that the new loan actually helps you.
- Residual income: What is left of your monthly income after taxes, debts, and a set allowance for living costs.
Who Qualifies?
You qualify when you meet four conditions. VA says the basics are a certificate of eligibility and living in the home you are refinancing.
1. Eligibility. Your COE decides this. Service requirements are VA’s rules, not the lender’s. You can request a COE through a lender, on VA.gov, or by mail.
2. Occupancy. This is a loan for the home you live in. It is not an investment-property product. An active-duty service member’s spouse or dependent may satisfy occupancy.
3. Credit. VA sets no minimum credit score, but lenders do. Across the wholesale programs Lendmire places VA loans with, the decision-score floor starts at 580. Some lenders set a higher floor.
4. Income and residual income. This is the controlling test. Many people expect a hard debt-to-income cap. There isn’t one. The 41% debt-to-income figure is a guideline, and a higher ratio needs residual income well above the table.
Remaining entitlement matters too. Refinancing a VA loan uses the entitlement tied to that loan. On full entitlement, there is no VA loan limit. With remaining entitlement, talk to a loan officer about what applies to you.
How Does the Loan Get Underwritten, Step by Step?
Step 1: Get your COE. You request it, or the lender pulls it. The lender needs it before anything else moves.
Step 2: Choose a lender and apply. You provide pay stubs, bank statements, and your current mortgage statement. The lender reviews credit, income, and occupancy. A broker can compare several wholesale lenders for you.
Step 3: The lender classifies the loan and runs the benefit test. VA’s cash-out user guide says the system sorts loans into Type I and Type II. Type I is a VA-to-VA refinance where the new loan does not exceed the payoff. Type II takes cash out. At least one net tangible benefit must be met.
Under 38 CFR 36.4306, the lender must give you the test and the result. VA lists eight qualifying benefits. Examples include removing monthly mortgage insurance, a shorter term, a lower payment, or higher monthly residual income. A refinance does not need a lower rate to pass. The half-percent rate-reduction and fee-recoupment tests belong to the streamline and do not apply to this cash-out.
Step 4: VA appraisal. The appraisal sets reasonable value. Your total new loan, fee included, is measured against it.
Step 5: Seasoning check, if the old loan is VA-backed. Our wholesale programs use the later of 210 days from your first payment and your sixth payment. Think roughly seven months and six payments. A non-VA loan does not face VA’s own seasoning rule, though some lenders add their own.
Step 6: Disclosures and closing. You get a comparison of the old and new loans. You also get an estimate of the equity removed. The rule says removing equity may affect your ability to sell later. Because this is a consumer mortgage, you receive a Loan Estimate and a Closing Disclosure. Compare the full terms on both.
What Does “Funding Fee Rolled In” Actually Mean?
Rolling in the fee means the lender adds it to the new loan balance instead of collecting it at closing. VA says the fee is a one-time payment due at closing unless you are exempt.
The cash-out fee is 2.15% of the loan on first use and 3.3% on later use. Check VA’s live fee table before you rely on those figures. A bigger down payment does not lower it, because VA says refinance fee rates don’t change with the down payment.
Here is the math in order:
1. Start with the payoff of your current loan.
2. Add any closing costs that are being financed.
3. Add the cash you want to receive.
4. Add the funding fee, which is a percentage of that new total.
That last step trips people up. The fee is a percentage of the whole new loan, not just the cash you take out. Financing it makes the base slightly larger, so the fee grows a little too.
Then the ceiling applies. The VA cash-out reaches 100% of the appraised value, and the financed fee sits inside that ceiling. If payoff, costs, cash, and fee add up to more than the home is worth, something has to give. You take less cash, pay some costs upfront, or skip financing the fee.
One more wrinkle: which closing costs can be financed varies by lender and by how much LTV room you have. Ask each lender what it will allow.
Financed or Paid in Cash: A Worked Comparison
Take a homeowner on first use. The appraised value is the anchor. The old loan payoff is 70% of that value. The homeowner wants cash equal to 20% of value. That puts the pre-fee total at 90%.
| Choice | Fee base | Result |
|---|---|---|
| Roll fee in | 90% of value | Fee added to balance |
| Pay fee in cash | 90% of value | Cash due at closing |
At 2.15%, the fee on a 90% loan is about 2% of home value. The total lands near 92%. That is inside the 100% ceiling. Many lenders set a lower cap, so confirm what your lender allows.
The tradeoff is plain. Rolling it in keeps cash in your pocket today. You then pay interest on the fee for as long as you hold the loan. Paying it upfront keeps the balance smaller.
When does paying in cash make sense? If you have the cash and plan to keep the loan for years, a smaller balance usually wins. If cash is tight, or the whole point is to free up money, rolling it in is the normal path.
Where the General Rule Breaks
A few edge cases change the picture.
- Fee exemption. Veterans receiving compensation for a service-connected disability are generally exempt, along with other groups. VA’s fee page lists them. If a disability rating is pending, ask the lender how that affects the fee. Get the exemption documented before closing.
- Repeat use. The 3.3% tier applies to later use of the benefit. Check your tier with your lender before you budget.
- Manufactured-home history. VA says a prior VA loan used only to buy a manufactured home still carries the first-time fee.
- Seasoning on non-VA loans. The seasoning rule is aimed at VA-to-VA loans, but some lenders apply it anyway, so ask before you assume it does not apply.
- Lender cap below the ceiling. If a lender’s own cap is lower than the 100% ceiling, ask what it will allow before you settle on a cash amount.
- IRRRL instead. If you hold a VA loan and just want a better term, the streamline avoids an appraisal and carries a 0.5% fee unless exempt. It does not give you cash.
What Commonly Causes Delays or Denials?
Most problems are fixable if you spot them early.
- Appraisal comes in low. Your cash shrinks, or the fee no longer fits.
- Residual income falls short. Paying off small debts before applying can help.
- Seasoning not met. Your old loan is too new.
- Missing COE or entitlement issues. Request the COE first.
- Unclear income. Gaps or large unexplained deposits slow a review.
- No net tangible benefit. The new loan has to help you in at least one listed way.
When Is a Cash-Out the Wrong Move?
Be honest about the use of the cash. VA warns about misleading refinance offers, so treat any pushy pitch with suspicion. A cash-out can also stretch your payoff timeline, and it turns other debts into debt secured by your house. CFPB links paying non-mortgage debts with mortgage debt to a higher foreclosure risk.
A cash-out is also a poor fit if you plan to sell soon, since you’ve removed equity. If your goal is only a better term on an existing VA loan, the streamline fits better.
For more on how fee waivers work, see Lendmire’s piece on the best VA cash-out refinance program to qualify for a funding fee waiver. For the mechanics of how loans are classified, read its guide to Type 1 and Type 2 rules.
Frequently Asked Questions
Can I roll the whole funding fee into a VA cash-out refinance?
Yes, the fee can be financed, as long as the total loan stays within the 100% ceiling and the lender’s own cap. Other closing costs are treated differently from lender to lender. Ask each one what it will let you finance.
Do I need an existing VA loan to do a cash-out?
No. A cash-out can pay off any first mortgage and move it into a VA-backed loan. The existing-VA-loan rule belongs to the streamline.
Does a bigger down payment lower the cash-out funding fee?
No. VA says refinance fee rates don’t change with the down payment. Your first-use or later-use status sets the percentage, unless you are exempt.
Is there a waiting period before I can refinance?
For a VA loan being paid off, the later of 210 days from your first payment and your sixth payment applies. A non-VA loan has no VA seasoning rule, though some lenders add one.
What is the net tangible benefit test?
It is VA’s check that the new loan helps you. The loan must meet at least one of eight listed benefits, such as removing monthly mortgage insurance, a shorter term, or higher residual income. Your lender must share the result.
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 your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. 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 – Cash-out refinance loan
2. VA
3. VA Cash-Out Refinance Quick Reference / User Guide
5. VA
6. VA – Funding fee and closing costs
7. CFPB links paying non-mortgage debts with mortgage debt to a higher foreclosure risk
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 a Co-Borrower Buyout Works on a VA Cash-Out Refinance · VA Cash-Out Refinance Requirements on a Home You Own · How to Qualify and Apply for a VA Cash-Out Refinance Under Type 1 and Type 2 Rules
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.