The Quick Read: A VA cash-out refinance needs a Certificate of Eligibility (COE) that shows how much entitlement you still have, and that number decides how much you can borrow without a down payment. Entitlement is the amount VA is willing to guarantee for you. The lender pulls your COE, checks what is already charged against it, and compares what is left to the new loan. Any gap can mean a down payment or a smaller loan, subject to lender guidelines and full file review.
Key Terms Defined
Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit, shows your entitlement, and notes whether you are exempt from the funding fee.
Entitlement: The dollar amount of your loan that VA promises to back if you default. It is the backing that lets a VA cash-out reach 100% of the appraised value.
Entitlement charged: The part of your entitlement tied up in a VA loan you still have, or one that was never restored.
Remaining entitlement: What is left after the charged amount comes off. It is also called bonus or partial entitlement.
Restoration: The process of getting used entitlement released so you can use it again.
Net tangible benefit: A test showing the new loan puts you in a better financial position than the old one.
Residual income: The money left each month after the mortgage, debts, and basic living costs. VA treats it as the controlling test.
Do You Need a New COE for a VA Cash-Out?
You need a COE that reflects your current entitlement. Most borrowers get an updated one pulled for the loan. VA’s own lender guide says a COE is not required for an IRRRL, the streamlined refinance. That exception does not carry over to a cash-out.
Why does it matter? A cash-out is a full loan, with a full appraisal and full underwriting. The lender has to know what entitlement is available today, not what it was when you bought. Your old COE can be stale. A prior loan may have been paid off, sold, or refinanced since it was issued.
You apply for a COE through va.gov, or your loan officer can request it through VA’s lender portal. The COE also shows your funding fee status: exempt, non-exempt, or a note to contact the Regional Loan Center. Veterans receiving compensation for a service-connected disability, and a few other groups, are exempt.
One more point. You do not need a prior VA loan to use this program. VA says a cash-out can also refinance a non-VA loan into a VA-backed loan. If you have never used the benefit, your entitlement is full and this section is simple.
How Does a VA Cash-Out Refinance Work, Step by Step?
Across the wholesale programs Lendmire places VA files with, the sequence is consistent. Here is the order that keeps a file clean.
1. Pull the COE. The lender confirms eligibility, entitlement charged, and funding fee status.
2. Decide on restoration. If the home you are refinancing already carries a VA loan, restoration comes up here. More on that below.
3. Underwrite. 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.
4. Order the VA appraisal. It is mandatory on a cash-out. It checks value and the Minimum Property Requirements. The resulting Notice of Value sets the reasonable value used for the loan-to-value ratio.
5. Run the net tangible benefit test. The lender gives you the test and the disclosures.
6. Check seasoning if the loan being paid off is a VA loan.
7. Close. The old lien is paid off, and any remaining cash goes to you.
The VA cash-out reaches 100% of the appraised value, including the financed funding fee. It also refinances any loan type into VA. Lendmire’s VA cash-out refinance program page walks through how those pieces fit together.
What Does Remaining Entitlement Do to Your Loan Size?
Remaining entitlement controls how much you can borrow with nothing down. With full entitlement, there is no VA loan limit. The wholesale programs we place files with serve amounts up to $4,000,000 on full entitlement. With only remaining entitlement, a down payment may apply, and the right figure for your area comes from a loan officer, not a rule of thumb.
The logic behind this is the 25% guaranty. VA explains that lenders may require a down payment if your remaining entitlement does not cover 25% of the loan you want. Most lenders want entitlement, down payment, or a mix of the two to reach that 25%.
VA’s own illustration multiplies remaining bonus entitlement by four to find the no-down-payment ceiling. That is a teaching example, not a rule that fits every borrower. Your county, your COE, and the lender’s guidelines all affect the result.
Think of it as a two-part check:
- Entitlement still available: Start with your full entitlement, then subtract whatever is charged to loans you still hold.
- Guaranty needed: The lender wants the guaranty to cover about a quarter of the new loan.
If the first covers the second, you can usually proceed with no down payment. If it falls short, the gap is what the lender asks you to cover with cash, or by borrowing less.
What Is the Difference Between Charged, Full, and Remaining Entitlement?
Full entitlement means you have never used the benefit, or it has been fully restored. Remaining entitlement means part of it is still tied to a VA loan. Your COE shows an “entitlement charged” figure, and lenders compare it against the loan you are asking for.
Picture a veteran who bought with a VA loan, moved, and kept the first house as a rental. That home still carries the loan, so its entitlement stays charged. Later she wants a cash-out on her current home. She has remaining entitlement, not full. The lender runs the 25% test against what is left.
Now picture a veteran who sold his first home and paid the VA loan off in full. His entitlement can be restored, and the COE can show full entitlement again. Restoration is not automatic, though. It has to be requested, which brings up the next question.
How Does Restoration Work?
VA lists three paths to restore entitlement. Per VA’s restoration page, entitlement can be restored when:
- The property was sold and the loan paid in full.
- A qualified Veteran-transferee assumes the loan and substitutes their own entitlement.
- The loan is paid off but the Veteran keeps the property. This one is allowed one time only.
The request goes through the VA Eligibility Center on VA Form 26-1880. That form includes a cash-out refinance restoration election for previous loans. After restoring, you notify VA so the COE gets updated.
Inside the lender portal, there is a separate path. A lender can restore entitlement for the property being refinanced, and the portal asks whether the home is currently or was previously secured by a VA loan. If you do not want restoration, the lender selects “None.” Answer “No” when the home has never carried a VA loan.
The practical advice: plan restoration before you apply. Entitlement used on a home you keep reduces what you have for your next purchase. Ask your loan officer what the COE shows today and what it should show after the refinance.
What Does the Lender Check for the Cash-Out Itself?
Beyond the COE, three rules shape every VA cash-out. VA tightened them through a 2018 interim final rule, which amended the cash-out regulation, 38 CFR 36.4306.
The 100% ceiling. The new loan, including the financed funding fee, cannot exceed 100% of the reasonable value on the VA appraisal. Individual lenders may set a lower limit of their own, and many wholesale lenders do.
The net tangible benefit test. The lender must give you the test, and the loan must pass it. The regulation text lists eight prongs, and the loan must meet at least one. Examples include eliminating monthly mortgage insurance, shortening the loan term, raising monthly residual income, and converting an adjustable loan to a fixed one. A loan at 90% or less of reasonable value also qualifies. The full test is in the GovInfo copy of the rule.
Seasoning. When the loan being paid off is a VA loan, the new loan cannot be guaranteed until the later of two dates: 210 days after the first monthly payment, or the date the sixth monthly payment is made. Seasoning does not apply when you refinance a non-VA loan.
VA also sets disclosure timing. The lender must deliver the net tangible benefit information by the third business day after application, and again at closing.
A VA cash-out also falls into one of two loan types. Type I means the new loan, including the funding fee, does not exceed the payoff of the old one. Type II means it does, which is where cash to you comes from.
What About the Funding Fee and Credit?
The funding fee is a one-time charge you can finance into the loan or pay at closing. On a cash-out refinance it is 2.15% for first use and 3.3% for subsequent use. Veterans receiving compensation for a service-connected disability, and the other exempt groups, do not pay it. Your COE shows whether you are exempt.
Financing the fee raises the balance, which matters because the loan cannot pass 100% of value. A fee that is financed eats into the cash you can take out.
On credit, VA sets no minimum score. The wholesale programs we place VA files with start at a 580 decision score, and some lenders set a higher floor. A lower score does not by itself rule you out, but it narrows which lenders will review the file. Everything here is subject to lender guidelines, and nothing is a commitment to lend.
Where Does the General Rule Break?
Several edge cases change the answer. Know them before you apply.
- Entitlement used and never restored. The COE shows entitlement charged, and a shortfall can mean a down payment or a smaller loan.
- One-time restoration already used. After that, future restoration requires disposing of all properties secured by VA loans.
- Loan above the conforming limit. A down payment, or entitlement that covers the 25% guaranty, is needed.
- Occupancy. VA says you must live in the home you are refinancing. Occupancy decides the leverage, so a cash-out on a home you do not live in is a different conversation.
- Records that disagree. If the COE still shows a charge after a payoff, or lists a loan incorrectly, the fix starts with VA, not the lender. Ask for a corrected record early, because it can hold up the file.
- State rules. Some states add their own limits on VA cash-outs. Ask your loan officer what applies where you live.
Common Misreadings That Cost Borrowers Time
“Cash-out is only for people with a VA loan.” No. A non-VA loan can be refinanced into a VA loan.
“VA caps cash-out at 90% of value.” The rule allows up to 100% of reasonable value. The 90% figure is one of the net tangible benefit prongs, and some lenders set it as their own limit. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
“Restoration happens on its own.” It does not. It is requested, and the COE is updated afterward.
“I always need a new COE.” Not for an IRRRL.
“Streamline and cash-out follow the same rules.” They do not. A cash-out needs a full appraisal, full underwriting, and the net tangible benefit test. Lendmire’s piece VA IRRRL vs VA Cash-Out: Choosing the Right VA Refinance lays out when each fits.
“No down payment means unlimited loan size.” The 25% guaranty logic is what limits it.
How Do You Decide in Practice?
Start with what you want from the refinance. If you only want a different loan on a VA mortgage, the IRRRL leaves your entitlement unchanged and skips the appraisal. If you want cash, or need to move from a non-VA loan into VA, the cash-out is the tool.
Then weigh the cost. VA notes that closing costs on a refinance can add up to thousands of dollars, so it pays to understand how the new loan relates to your home’s value. A cash-out also resets the loan term and uses up equity. The net tangible benefit prongs are the yardstick: a shorter term, no monthly mortgage insurance, or higher residual income all show the household comes out ahead.
Finally, protect your entitlement. If you plan another VA purchase, ask how this refinance changes your COE. Lendmire’s explainer VA Cash-Out Refinance: How the 100 Percent Ceiling Really Works helps with the leverage side of that decision.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Frequently Asked Questions
Do I need a new COE for a VA cash-out refinance?
Usually, yes, or at least an updated one pulled by the lender. VA’s lender guide says a COE is not required for an IRRRL, but a cash-out is a full loan. The lender needs to see your current entitlement and funding fee status before it can size the loan.
Does refinancing restore my entitlement automatically?
No. Restoration is requested, not automatic. It goes through the VA Eligibility Center on Form 26-1880, or the lender can select restoration in VA’s portal for the property being refinanced. After restoring, you notify VA so the COE is updated.
What happens if my remaining entitlement is too small for the new loan?
The lender compares your remaining entitlement, down payment, or a combination of the two against the 25% guaranty it wants on the loan. A shortfall can mean a down payment or a smaller loan. A loan officer can tell you where you land.
Can I take a VA cash-out if my current loan is not a VA loan?
Yes. VA says a cash-out can refinance a non-VA loan into a VA-backed loan. The seasoning rule applies only when the loan being paid off is a VA loan, so you do not need a prior VA loan.
Can I use restoration more than once?
The one-time restoration, for a loan paid off while you keep the home, is allowed only once. After that, further restoration generally requires disposing of all properties secured by VA loans. Plan around that before you use it.
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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References
1. VA – Lender COE portal guide
2. VA – Cash-out refinance loan
3. VA – Loan limits and bonus entitlement
4. VA – Restoration of entitlement
5. Federal Register interim final rule on VA cash-out loans
6. 38 CFR 36.4306 (Cornell LII, regulation text)
7. 38 CFR 36.4306 (GovInfo, official CFR PDF)
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 Appraisal Requirements and the Tidewater Process · VA Cash-Out Requirements for Paying Off a Non-VA Loan · How to Close a VA Cash-Out in Texas and Handle Rescission
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.