The Quick Read: Usually, yes, if you are an eligible veteran with a certificate of eligibility who lives in the home. A VA cash-out can reach more of your equity than an FHA cash-out and carries no monthly mortgage insurance. The trade-offs are a one-time funding fee, a full appraisal, and full underwriting. It is not automatic, and your entitlement and cash needs decide it.
Why Does VA Usually Win on Leverage and Insurance?
VA wins on two points that matter to most homeowners: how much equity you can borrow against and what you pay each month to carry the loan. FHA cash-out stops at 80% of the home’s value. VA can go up to 100% of the value its appraiser sets.
That gap is the whole story for many veterans. Say your conventional loan sits at 85% of the home’s value. An FHA cash-out cannot touch that file, because the new loan would exceed 80%. A VA cash-out can replace it.
Monthly insurance is the second point. FHA charges an upfront premium of 1.75% of the base loan, usually financed, plus an annual premium between 0.15% and 0.75% of the balance. On a thirty-year loan above 90% LTV, that annual premium lasts for the full term. At or below 90% it ends after eleven years. VA has no ongoing mortgage insurance.
Here is the catch. VA is not free. It charges a one-time funding fee, and VA tells borrowers that closing costs “can add up to thousands of dollars.” Both programs cost money. They just charge it differently.
VA Cash-Out vs FHA Cash-Out: Side by Side
The table below shows where the two programs differ for a homeowner leaving a conventional loan. Program figures are typical of the wholesale programs Lendmire places files with, subject to lender guidelines and full file review.
| Factor | VA Cash-Out | FHA Cash-Out |
|---|---|---|
| Maximum loan vs. value | Up to 100% of VA value | 80% LTV |
| Monthly mortgage insurance | None | Annual premium, 0.15%–0.75% |
| Upfront charge | One-time funding fee | 1.75% premium, usually financed |
| Eligibility | Certificate of eligibility | Owned and occupied 12 months |
| Credit floor | Set by the lender | 580 decision score |
| Underwriting | Credit plus residual income | Ratios from 31/43 to 40/50 |
Two notes on that table. First, VA itself sets no minimum credit score. Lenders set their own, and some set a higher floor than others. Second, FHA’s ratio range depends on documented compensating factors, and the automated finding governs most files.
Do You Have to Take Cash Out of a VA Cash-Out?
No. The name confuses people. A VA cash-out refinance can replace a loan that is not VA-backed, such as your conventional mortgage, with a VA-backed one. It can also pull cash from equity. VA describes both uses on its cash-out page.
You qualify for the product by paying off a non-VA loan. Taking cash is a choice on top of that. If you only want to shed monthly mortgage insurance or an adjustable structure, you can borrow just enough to pay off the old loan and the costs.
The streamline VA product is not an option here. The VA streamline only refinances an existing VA loan. A conventional loan has to go through the cash-out route.
How Does the Process Work for a Conventional-Loan Veteran?
The steps are the same as any full refinance, with VA’s extra pieces added. Here is the order a typical file follows:
1. Get your certificate of eligibility. A lender can pull it for you, or you can request it through VA.gov or by mail.
2. Confirm you live in the home. The program is for your own residence. For active-duty members, a spouse or dependent can meet the occupancy rule.
3. Order the appraisal. VA makes it mandatory on a cash-out. The appraisal sets the home’s reasonable value, which caps the loan at 100%.
4. Pass full underwriting. The lender checks credit, income, and the new loan’s fit with your budget. VA leans on residual income, meaning what is left of your pay after the major monthly obligations. A debt ratio is a guide, not a hard wall.
5. Show a net tangible benefit. The refinance has to leave you better off in a way VA recognizes.
Net tangible benefit trips up borrowers, so here it is in plain words. VA’s circular on cash-out refinances says these standards apply to every VA cash-out. VA lists several tests that can satisfy the rule. Dropping monthly mortgage insurance counts. So does a loan comfortably below the home’s value, or swapping an adjustable loan for a fixed one. Your lender documents which test your file meets.
One more rule works in your favor. VA’s seasoning requirement, a waiting period after your last loan, covers cash-outs that refinance a VA loan into another VA loan. A conventional-to-VA cash-out does not face that waiting period. FHA has its own occupancy and payment-history rules. Across the wholesale programs Lendmire places files with, an FHA cash-out requires you to have owned and lived in the home for 12 months before the case number is assigned.
If you want to see how FHA’s version works from the inside, here is Lendmire’s FHA cash-out refinance program overview.
What Did the FHA Cash-Out Limit Change?
FHA used to cap cash-out loans at 85% of value. That ended when HUD cut the cap to 80% of value in Mortgagee Letter 2019-11, which also amended the HUD handbook. You will still see the older 85% figure on outdated pages and in old lender ads. It no longer applies.
That change widened the gap between the two programs. A borrower with a conventional loan above 80% of value now cannot use FHA cash-out at all. For that borrower, VA is not just the better pick. It may be the only government-backed cash-out that fits.
Skip VA When These Apply
VA is not always the right call. Here are the situations where FHA cash-out, or keeping your conventional loan, comes out ahead.
- You are not eligible. No certificate of eligibility means no VA loan. Eligibility is the front door.
- You do not live in the home. Both programs are for a principal residence. If the home is a rental or second home, occupancy decides the leverage, and neither VA nor FHA cash-out fits.
- Your conventional loan is already cheap to carry. If you have no mortgage insurance and a low balance against value, a VA swap removes nothing. You would pay a funding fee for little gain.
- You plan to sell soon. One-time fees need time to pay back. A short horizon in the home makes any refinance harder to justify.
- Your VA entitlement is tied up. If you already use entitlement on another VA loan, check what is left on your certificate of eligibility before you plan around it.
- You need a small amount of cash and want to avoid a full refinance. A second lien, which sits behind your current mortgage, can leave your first loan alone. Lendmire’s piece Should a Veteran Ever Pick a VA Cash-Out Over a Second Lien? walks through that choice.
Honestly, this one is a close call more often than the marketing suggests. The veteran with a high balance and monthly mortgage insurance has an easy decision. The veteran with a low balance and no insurance has a hard one.
Three Borrower Scenarios, No Dollars Needed
These are hypothetical, built on percentages of value, not real files.
Scenario one: the high-balance borrower. Picture a veteran whose conventional loan sits near 85% of the home’s value and carries monthly mortgage insurance. FHA cash-out is closed to this file because of the 80% cap. A VA cash-out can replace the loan, remove the monthly insurance, and satisfy net tangible benefit. This is the clearest win for VA.
Scenario two: the middle-balance borrower who wants cash. Consider a veteran at about 70% of value who needs funds for a renovation. Both programs can reach this file. FHA would leave at least 20% equity behind, with an upfront premium and annual premium on top. VA adds a funding fee but no monthly insurance. VA usually costs less to carry here, though the funding fee can change the picture. Disability-compensation recipients are exempt from the fee, which tilts it further toward VA.
Scenario three: the low-balance borrower with no insurance. Say a veteran owes about half the home’s value and pays no mortgage insurance. No benefit test about insurance applies. A cash-out would raise the balance for little return. Keeping the current loan, or using a smaller product, may fit better.
How Much Cash Is Too Much?
Because VA reaches up to 100% of value, you can borrow a lot. That does not mean you should. A higher balance means a higher payment and more total interest, and VA’s own consumer warning says a cash-out rarely lowers the monthly payment. It adds to the loan.
Think of equity as a cushion. Borrow to 100% of value and you have none. A dip in prices could leave you owing more than the home is worth, which makes it hard to sell or refinance again. FHA’s 80% cap forces a cushion. With VA, you have to build your own.
Many borrowers also find lenders set a lower ceiling than VA does. Some stop short of 100%. Ask where your lender draws the line before you plan a budget around the full amount.
A practical rule for a veteran leaving a conventional loan: borrow what the purpose needs, plus the financed costs, and leave a margin.
What to Check Before You Apply
A few details can override the headline numbers.
- State rules. Some states cap how much equity you can take out by state law. That limit can override what the program allows.
- Lender overlays. An overlay is a lender’s own rule layered on top of the program. Credit floors and leverage ceilings often differ from VA’s published limits.
- Property type. Both programs expect a principal residence. Condos and multi-unit homes bring their own review.
- Funding-fee status. First use, later use, and disability exemption change the fee. Confirm yours before you compare costs.
- Entitlement. Look at your certificate of eligibility for what remains.
- The costs on your Loan Estimate. Compare the full terms on the Loan Estimate you receive, not a headline feature.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Certificate of eligibility (COE): The VA document that proves you earned the home loan benefit.
Funding fee: A one-time VA charge, often financed into the loan, that replaces monthly mortgage insurance.
Reasonable value: The home’s value as set by the VA appraisal. It caps a VA cash-out loan.
Net tangible benefit: VA’s test that a refinance must leave you better off in a recognized way.
Residual income: The money left from your pay after major monthly obligations. VA uses it alongside debt ratios.
Seasoning: A waiting period required between loans or events, such as owning and living in a home before a refinance.
Overlay: A lender’s own rule stacked on top of a program’s published standard.
Frequently Asked Questions
Do I need an existing VA loan to do a VA cash-out?
No. You need a certificate of eligibility, not a prior VA loan. A VA cash-out can replace a conventional or FHA mortgage with a VA-backed one. Your lender can pull the certificate for you, or you can request it yourself through VA.gov.
Does a conventional loan with no mortgage insurance change the answer?
Yes. VA’s biggest advantage is shedding monthly insurance and reaching above 80% of value. If your conventional loan has neither problem, a VA cash-out removes less. You would still pay a funding fee, so the swap may not pay off unless you need cash or want a different loan structure.
Can I use the VA streamline instead?
No. The streamline only refinances an existing VA loan into another VA loan. It cannot replace a conventional or FHA mortgage. A conventional-loan veteran has to use the cash-out product, with its appraisal and full underwriting.
Who pays no funding fee?
Veterans who receive VA service-connected disability compensation are exempt. Other borrowers pay a one-time fee that is higher on later use. The fee can be financed, though a financed fee cannot push the loan above 100% of the home’s reasonable value.
What if I do not qualify for VA?
Then an FHA cash-out is the government-backed alternative, with an 80% cap, a 580 decision score at the wholesale programs Lendmire places with, and 12 months of ownership and occupancy. It also carries the upfront and annual premiums. Everything is subject to lender guidelines and full file review.
Your 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. Lendmire is a mortgage broker that arranges FHA, VA, conventional, and jumbo loans through wholesale lenders in 16 states. Nothing here is a commitment to lend, and every program figure depends on full file review.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. VA.gov: Cash-out refinance loan
3. HUD Mortgagee Letter 2019-11
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much Cash an FHA Cash-Out Releases Over an Existing FHA Loan · How Much Equity an FHA Condo Needs for a Conventional Cash-Out · Should a Veteran Refinance an FHA Loan Into a VA Cash-Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.