The Quick Read: A VA cash-out refinance can reach 100% of your home’s appraised value, while a conventional cash-out tops out at 80% on a one-unit primary residence. That is 20 extra points of value you could borrow against. Your cash in hand is smaller than the headline, because the payoff, the financed funding fee, and closing costs come out first. The appraisal and the lender’s own cap then set the real number.
Key Takeaways
- VA allows a loan of up to 100% of appraised value, including the financed funding fee. Conventional stops at 80% for a one-unit home you live in.
- The funding fee sits inside the 100% ceiling. It shrinks your cash dollar for dollar.
- Cash released equals the new loan, minus your payoff, minus the financed fee, minus closing costs.
- The more you owe today, the narrower the gap between the two programs becomes in cash terms. At high balances, conventional may release nothing at all.
- Maximum leverage leaves you with no equity cushion. That is the real cost of the largest release.
How Is a Cash-Out Release Calculated?
Both programs use the same formula. The new loan replaces your old mortgage. Whatever is left after the old loan is paid off, and after costs, comes to you.
Net cash = new loan − payoff of your current mortgage and any other liens − financed funding fee − closing costs.
The only difference is the size of the new loan. VA sets the ceiling at 100% of the appraised value. Conventional sets it at 80%. Everything else in the formula works the same way.
This is where the VA program earns its reputation. Across the wholesale programs Lendmire places VA files with, the VA cash-out refinance program reaches 100% of the appraised value, including the financed fee. It also refinances any existing loan type into a VA loan. That means a conventional or FHA borrower can switch.
Side by Side on One Home
Dollar figures would only distract here, so this uses percentages of appraised value. Picture a home with a current mortgage balance equal to 60% of its appraised value. These are modeled assumptions, not market data. The borrower is a first-time user of the VA benefit, the fee is financed, and closing costs are ignored.
| Factor | VA cash-out | Conventional cash-out |
|---|---|---|
| Maximum loan | 100% of value | 80% of value |
| Fee in the loan | 2.15% funding fee | None |
| Base loan after fee | About 97.9% | 80% |
| Payoff | 60% | 60% |
| Cash before closing costs | About 37.9% | 20% |
VA releases roughly 18 points more of the home’s value in cash. Closing costs then come out of both numbers.
Why is the base loan 97.9% and not 100%? The fee is part of the loan. If the base loan were 100%, the fee would push the total past the ceiling. So the base loan shrinks until the loan plus the fee equals 100%.
Veterans exempt from the fee keep that slice. In the same example, an exempt borrower would see about 40% of value in cash before closing costs. A borrower on a second or later use pays the higher 3.3% tier, which trims the release by a little over a point.
What Happens When Your Balance Changes?
The gap is not fixed. It depends on how much you still owe. Same assumptions as above, with the payoff varying:
| Payoff (% of value) | VA cash before costs | Conventional cash before costs |
|---|---|---|
| 50% | About 47.9% | 30% |
| 70% | About 27.9% | 10% |
| 85% | About 12.9% | — |
The pattern is clear. At a 50% balance, both programs release real money. At 85%, a conventional cash-out has no room at all, since 85% already exceeds its 80% ceiling. A VA loan still has room.
An appraisal that comes in low hits both columns. Every percentage above is measured against the appraised figure. A lower appraisal shrinks the ceiling and leaves your payoff unchanged, so the cash shrinks faster than the value does.
How Is the Loan Underwritten, Step by Step?
A VA cash-out follows a set path. Each step can change how much you get.
1. Eligibility. You need service eligibility and a certificate of eligibility from VA. Service requirements are VA’s rules, not the lender’s.
2. Appraisal. A VA appraiser sets the “reasonable value” of the home. That number is the base for the 100% test. It is not the same as what a neighbor’s house sold for.
3. Loan classification. VA sorts refinances by whether they return cash. A VA quick reference for cash-out refinances calls a loan that exceeds the payoff a Type 2. That is the borrower who actually pulls cash.
4. Net tangible benefit. The new loan must be in your financial interest. The VA’s federal regulation on refinancing lists the ways to meet that test. Examples include a lower payment, a shorter term, an ARM-to-fixed switch, or a loan at or below 90% of reasonable value. The lender must give you a comparison disclosure that shows this.
5. Seasoning. For a VA-to-VA refinance, the later of 210 days from your first payment and your sixth payment applies. A seasoning certification is part of the file.
6. Disclosures. VA requires an initial and a final cash-out disclosure in the file.
7. Credit and income review. Residual income is the controlling test. That is the money left each month after debts, taxes, and living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table. The wholesale programs Lendmire places VA loans with start at a 580 decision score, subject to lender guidelines and full file review.
Step 4 trips up many borrowers. Meeting the loan-to-value limit does not satisfy the benefit test. They are separate checks.
Why Does VA Release More, and What Pulls It Back Down?
Two features explain most of the gap. VA allows 100% leverage. And the VA loan carries no monthly mortgage insurance. Instead there is a one-time funding fee, which is 2.15% on a first use and 3.3% on later uses for a cash-out. That fee can be financed, and exempt veterans owe none.
Conventional is different. Fannie Mae’s Eligibility Matrix lists 80% as the maximum for a one-unit primary residence. It drops to 75% for a 2–4 unit primary residence and for a one-unit second home. The same matrix has a limited cash-out option with much higher leverage. Do not confuse it with a true cash-out. Limited cash-out returns no meaningful cash.
Several things pull the VA number back down:
- Lender caps. VA permits 100%. Some lenders set a lower limit on their own. The 100% described here is what the wholesale programs Lendmire works with allow. Ask any lender what its own cap is before you plan around the headline.
- The appraisal. A low value shrinks the ceiling.
- The payoff. A bigger balance leaves less room.
- The fee. It is inside the ceiling, so it reduces cash dollar for dollar.
- Closing costs. They can be rolled in, but only within the ceiling.
Where Does the General Rule Break?
A few situations change the math.
The fee pushes you over the line. If the financed fee would take the loan past 100%, the extra part must be paid in cash at closing. The VA’s own circular on cash-out loans says VA no longer guarantees refinances above 100%. It measures the figure as the total loan, fee included, divided by the appraiser’s reasonable value.
Your current loan is not a VA loan. A conventional or FHA loan can be paid off with a VA cash-out. VA treats a non-VA payoff more lightly than a VA-to-VA refinance when it comes to seasoning and recoupment checks. This makes the switch worth a look when you hold a conventional loan with little equity.
You are refinancing an existing VA loan. Seasoning applies, and the new loan must clear the benefit test. Entitlement carries over when a VA loan is paid off with a new VA loan on the same home.
The home is not your primary residence. VA is for the home you live in. Occupancy also changes conventional leverage, as the 75% figures above show, so a second home or a 2–4 unit property changes both columns.
The property type is unusual. Manufactured homes get separate and generally lower limits under conventional guidelines, and VA has its own manufactured-home provisions.
Your state adds limits. Some states restrict home-equity cash-out, so the state you live in can cap the loan below either program’s ceiling.
Your current loan has a prepayment penalty. A refinance may include any contractual penalty owed on the loan being paid off. That cuts into your cash.
Lender costs. Closing costs and other lender charges can be added to the loan, but only within the 100% ceiling.
What Do You Give Up for the Bigger Release?
You give up the cushion. At 100% leverage, you own none of the home’s value on paper after closing. Any dip in price puts you underwater. A loan with 20% equity left behind does not carry that risk. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The CFPB’s research on cash-out borrowers is a useful reality check. A cash-out replaces your original mortgage. Payments and terms are likely to increase. The research cites findings that a typical cash-out has a longer term and a larger monthly payment than the loan it replaces. It also notes that using mortgage debt to pay off other debts can raise foreclosure risk.
A VA cash-out also resets the clock. A larger balance on a fresh term means you pay interest on the extra borrowing for years. The longer you keep the loan, the more that extra cash costs.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
When Is the Largest Release Not the Best Choice?
Borrowing the maximum is a choice, not a goal. Sometimes less is smarter.
- You only need a small amount. Borrowing the full ceiling when you need a fraction adds balance and interest you do not use. A lower loan-to-value can also satisfy the benefit test on its own, because a loan at or below 90% of reasonable value qualifies.
- You hold a favorable loan. A cash-out replaces your whole mortgage. If your current loan has terms you like, a second lien such as a home equity loan or HELOC leaves the first mortgage in place and takes only what you need.
- You want a lower payment, not cash. A VA streamline refinance, the IRRRL, refinances an existing VA loan with no VA appraisal and a 0.5% fee unless you are exempt. It returns no cash.
- You are close to your budget limit. Residual income is the controlling test for good reason. The extra payment has to fit with room to spare.
Key Terms Defined
Reasonable value: The value VA’s appraiser assigns to the home. The 100% ceiling is measured against it.
Loan-to-value (LTV): The new loan, including any financed fee, divided by the appraised value.
Funding fee: A one-time VA charge, in place of monthly mortgage insurance. It can be financed, and exempt veterans owe none.
Net tangible benefit: A test showing the refinance helps you financially. Examples include a lower payment or a shorter term.
Residual income: The money left each month after your debts and living costs. It is the controlling test in VA underwriting.
Seasoning: A waiting period before you can refinance, counted from your first payment.
Limited cash-out: A conventional refinance that pays off the old loan and costs but returns no meaningful cash.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Does 100% mean I walk away with all my equity?
No. The financed funding fee, your payoff, and closing costs all come out of that 100%. In the example above, a 60% balance leaves roughly 38% of value in cash before closing costs. That is a large release, but it is not all of your equity.
Does every lender allow the full 100%?
No. VA sets the ceiling, and individual lenders may set a lower one. The wholesale programs Lendmire places VA loans with reach 100% of appraised value, including the financed fee. Ask any lender for its own cap before you rely on the headline.
Can I use a VA cash-out if my current loan is conventional or FHA?
Yes. A VA cash-out can pay off any loan type. VA-to-VA refinances carry added seasoning and recoupment checks. A non-VA payoff mainly needs the net tangible benefit and the required disclosures.
Is a conventional loan at 97% the same as a conventional cash-out?
No. The 97% option is limited cash-out and returns no meaningful cash. A true conventional cash-out on a one-unit primary residence stops at 80%, per Fannie Mae’s matrix.
When does a conventional cash-out release nothing at all?
When your balance is already at or above 80% of appraised value. There is no room under the ceiling. A VA cash-out can still work in that situation, subject to the appraisal, residual income, and lender review.
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.
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References
1. VA Cash-Out Refinance Quick Reference
2. eCFR, 38 CFR 36.4306 (VA refinancing rules)
3. Fannie Mae Eligibility Matrix
5. CFPB Office of Research blog on cash-out refinances
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 · How Much a Disability Rating Changes Your VA Cash-Out Payment and Cash · VA Cash-Out vs Conventional for a Veteran Wanting the Most Cash
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.