The Quick Read: Yes, it can be done, but not by turning your portfolio into a paycheck on a formula. VA publishes no formula that converts savings into income. Lenders count income you actually receive, such as pensions, Social Security, annuities, and established account withdrawals. They treat extra liquid savings as a strength in the file. How a lender handles withdrawals varies, so expect it to depend on the lender.
Key Terms Defined
Seven terms come up again and again in this topic. Here they are in plain words.
- Cash-out refinance: A new loan that pays off your current mortgage and puts the extra equity in your hands as cash.
- Effective income: Income a lender can verify, that looks stable, and that is likely to continue.
- Residual income: What is left of your monthly income after the mortgage, other debts, taxes, and a set allowance for living costs. On VA loans, this is the controlling test.
- Debt-to-income ratio (DTI): Your monthly debts divided by your monthly income. For VA, 41% is a guideline, not a cap.
- Liquid assets: Money you can reach fast, like bank balances, brokerage accounts, and retirement accounts.
- Certificate of Eligibility (COE): VA’s proof that you qualify to use the benefit. VA decides this, not the lender.
- Net tangible benefit: A test showing the refinance leaves you better off in a real, measurable way.
How Does a VA Cash-Out Work for Someone Without a Paycheck?
A VA cash-out works the same for a retiree as for anyone else: you refinance the home you live in, and the lender checks that your income supports the new loan. What changes is the kind of income. Instead of pay stubs, the file is built from award letters, statements, and traditional personal-income documentation.
Lendmire is a mortgage broker, not a lender. It arranges these loans through wholesale lenders, subject to lender guidelines and full file review. Nothing here is a commitment to lend.
The VA cash-out refinance program reaches 100% of the home’s appraised value, including the financed funding fee. It refinances any loan type into a VA loan, so your current mortgage does not have to be a VA loan. There is no mortgage insurance.
On credit, VA itself sets no minimum score. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher floor.
VA sets no salary floor and no income ceiling. The file has to show that the income you have is real and will last.
Can Someone Living on Asset Income Get a VA Cash-Out on Assets Alone?
Not on assets alone, and not through a special program. VA has no “asset depletion” loan. That is the method some non-VA programs use, where a lender divides your balance by a set number of months and calls the result income.
VA’s approach is different. Its underwriting asks whether income is verifiable, stable, and likely to continue. The VA Lenders Handbook underwriting chapter calls income analysis “not an exact science” and leaves room for judgment on each file. That is good news and bad news.
The good news: your savings still matter. The bad news: nobody can promise how a given underwriter will read your withdrawals.
Assets can show up in a VA file in three ways:
| Path | How it works | Strength |
|---|---|---|
| Income you receive | Pensions, Social Security, annuities | Strongest |
| Established account draws | Regular IRA or 401(k) withdrawals, documented | Varies by lender |
| Reserves and compensating factors | Savings left after closing | Supports a tight file |
The first path is the cleanest. The second is where lenders differ most. The third never replaces income, but it can tip a borderline file the right way.
Which Retirement Income Counts, and What Proves It?
Pensions and other retirement benefits count as effective income when they are likely to continue. Interest and dividends can count with traditional personal-income documentation behind them. Account withdrawals can count when lenders see an established pattern and enough balance to keep going. Here is how documentation usually looks across the wholesale programs Lendmire works with.
| Income source | Typical proof | Notes |
|---|---|---|
| Pension or annuity | Award letter, 1099 | Must be expected to continue |
| Social Security | Award letter, bank deposits | Often non-taxable in part |
| IRA or 401(k) draws | Account statements | Draws should already be flowing |
| Interest and dividends | Traditional personal-income documentation, statements | A track record helps |
| Spouse income | Same as yours | Only if the spouse is on the loan |
Two things to understand about that table.
First, “already flowing” matters. A lender generally wants to see withdrawals that have started and have a history. A plan to begin drawing next month is a weak foundation. Many lenders also want to see that the balance can sustain the draws for several years, since income has to be expected to continue.
Second, non-taxable income, such as part of Social Security, can be grossed up. That means the lender adds a tax allowance so the income reads at its true value. Only non-taxable income gets this treatment. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What About a Big Portfolio That Pays Out Little?
This is the trap that catches asset-rich retirees. Picture a household with a large brokerage account, a paid-for-looking life, and only a modest pension. On paper, the verified monthly income is small.
The lender cannot count the portfolio’s size. It counts what the portfolio pays, or what you actually withdraw on a documented schedule. If you let growth stocks compound and take little, your file shows little.
Fixes exist, though none is automatic:
- Set up regular withdrawals well before you apply, so there is a history to document.
- Keep statements that show the balance holding up after those withdrawals.
- Add a co-borrower with verifiable income, such as a spouse on the loan.
- Point to the other strengths in the file: low debts, strong credit, and cash left after closing.
VA’s own lender training material lists compensating factors that can support a file. These include significant liquid assets, high residual income, a low DTI, and minimal payment shock. That last one deserves attention. If your new payment is close to your current one, the file reads easier.
A Walk-Through: One Illustrative Household
This example is hypothetical, with no real dollar figures, and shows the logic only.
Say a married couple owns a home with solid equity. One spouse receives a pension. Both draw Social Security. They also take regular monthly withdrawals from an IRA, and those withdrawals began well over a year ago.
A lender would likely build the file like this:
1. Count the pension and Social Security from award letters.
2. Review IRA statements to confirm the draws are regular and the balance can support them going forward.
3. Add any interest or dividends that the traditional income documentation supports.
4. Total the verified income and compare it to the new mortgage payment plus other debts.
5. Run the residual income test, which is the one that matters most.
If DTI lands above the 41% guideline, the file is not dead. A ratio above that needs residual income well above VA’s required residual income levels for the household’s size and region. A large cushion of liquid savings supports that case.
Now change one thing. Same couple, but the IRA withdrawals only started last month. Many lenders would hesitate to count them. That one detail can decide the outcome.
What Tests Does a VA Cash-Out Have to Pass?
Every VA cash-out has to clear a short list of tests set by VA. VA Circular 26-19-05 lays them out: a loan-to-value cap of 100% of reasonable value, a net tangible benefit test, a loan comparison, a home equity disclosure, and seasoning. VA’s cash-out refinance page describes the purpose: pay off debt, pay for school, fund home improvements, or move a non-VA loan into a VA loan.
A few details retirees ask about:
- Appraisal. A VA appraisal sets the reasonable value. Loan-to-value is the total loan, including any financed funding fee, divided by that value.
- Seasoning. The existing loan has to be seasoned: the later of 210 days from the first payment and the 6th payment.
- Funding fee. For a cash-out, the fee is 2.15% on first use and 3.3% after that. It is waived for veterans receiving compensation for a service-connected disability and for other exempt groups. It can be financed into the loan, which raises the balance.
- Type I and Type II. A Type I cash-out does not exceed the payoff of the old loan. A Type II exceeds it and puts cash in your hands. Different rules apply to each.
- State limits. Some states cap how much equity a homeowner can pull out. Ask your loan officer if that applies where you live.
Is a Cash-Out the Right Move on a Fixed Income?
Often it is not, and an honest broker says so. A cash-out adds the cash to your loan balance. VA’s own consumer guidance warns that this raises the balance and lifetime interest, and very rarely lowers the payment. For someone with no paycheck, a bigger payment is a bigger monthly draw on savings.
Here is the part retirees miss. The same accounts that support your qualifying income also fund the larger payment. A market drop can shrink the balance and raise the pressure at once. That is stacking risk.
It tends to fit when:
- The cash pays off high-cost debt, and your total monthly obligations fall.
- The money funds a one-time need with a clear end, such as a necessary repair.
- Your verified income covers the new payment with room to spare.
- You are moving a non-VA loan into a VA loan for clearer terms.
It tends to fit poorly when:
- The cash would cover everyday living costs year after year.
- Qualifying depends on withdrawals that are only just starting.
- The new payment would sit well above your current one.
- A smaller withdrawal from savings would solve the same problem.
Skip the refinance if the only reason is that the numbers can be made to work. Working and wise are different.
The regulators have noticed this area. The CFPB ordered a lender to pay a penalty for misleading veterans in cash-out marketing. The comparisons showed only principal and interest against a full payment with taxes and insurance. The same action describes “churning,” where lenders push veterans to refinance repeatedly. Compare total cost, not just the headline payment.
What Should You Gather Before You Apply?
Prepare in this order, and the file goes together cleaner.
1. Your COE. Confirm eligibility first, since VA decides it.
2. Income letters. Pension, annuity, and Social Security award letters, plus 1099s.
3. Account statements. Recent statements for every account you draw from, showing the withdrawals and the remaining balance.
4. Conventional personal-income paperwork. Needed when interest or dividends are part of the income.
5. Current mortgage statement. It shows the payoff and the payment history for seasoning.
6. Debt list. Every monthly obligation, since DTI and residual income depend on it.
7. Co-borrower papers. If a spouse will be on the loan, the same documents for them.
Start the withdrawal history early if it is not already established. It is the one item you cannot create overnight.
What Should You Ask a Loan Officer?
Open with the question that matters most, then work down the list.
- How does your lender treat retirement account withdrawals as income? This is the overlay question. VA’s guidance leaves room, and lenders fill it differently.
- How long must withdrawals have been flowing?
- How much balance must remain, and for how long?
- Does the lender set a credit floor above VA’s? Some lenders do.
- Will you show me the loan comparison and the net tangible benefit?
- What does the new balance look like with the funding fee financed, and without it?
- Does my state limit cash-out?
A good answer is specific. A vague one means keep shopping.
Frequently Asked Questions
Is the cash I take out taxable?
Cash from a refinance is generally loan money, not income.
Can I refinance a non-VA loan with a VA cash-out?
Yes. A VA cash-out can refinance any loan type into a VA-backed loan. The home still has to be your primary residence, and a home with no existing loan is not a typical fit for this program. Your COE and the file review decide the rest.
Does my spouse’s income count?
It can, if your spouse is on the loan and contractually obligated. That income is treated the way the veteran’s would be. For a surviving spouse, VA’s COE rules decide eligibility, and a loan officer can walk through where you stand.
Does a disability rating change the funding fee?
Yes. Veterans receiving compensation for a service-connected disability are exempt from the funding fee, as are the other exempt groups. For everyone else, the cash-out fee is 2.15% on first use and 3.3% after, and it can be financed.
What if a cash-out does not fit?
Look at the alternatives. You might take smaller withdrawals from savings, use a different loan type, or wait until your withdrawal history is established. The best answer sometimes means keeping the loan you have.
Where Certainty Ends
A broker can describe how these files work. A broker cannot tell you how your lender will read your withdrawals, or what your appraisal will say. Those answers come from the lender, the appraiser, and VA.
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. Reach the team at 828-256-2183 or request a quote at Lendmire’s quote page.
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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References
1. VA Lenders Handbook, Chapter 4 – Underwriting
2. VA Loan Guaranty Conference – credit underwriting
4. VA – Cash-out refinance loan
5. VA News – refinancing and your home loan
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: Bank vs Broker VA Cash-Out for a Retiree on Pension Income · VA Cash-Out Refinance Non-Borrowing Spouse Rules for a Retiree · VA Cash-Out Income Rules for an Active-Duty Member Facing a PCS Move
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.