The Quick Read: A VA cash-out refinance can reach 100% of your home’s appraised value, and the financed funding fee counts inside that number. You get cash only after the new loan pays off your old one and the fee and costs. “Full-value cap” is shorthand, not an official VA term, and a lender may set a lower limit than VA does. Your net cash is always less than your paper equity.
Here is the practical picture. Say your home appraises well above what you owe. VA lets the new loan climb to the appraised value, but the new loan has to cover the old payoff, any other liens, the funding fee, and closing costs first. What is left is yours.
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.
For a high-level overview of the product, see Lendmire’s page on the VA cash-out refinance program. This guide walks through the mechanics step by step, so you know what the cap does and where it stops helping.
Key Terms Defined
Reasonable value: The value VA assigns to your home through its appraisal. The cap is measured against this number, not what you think the house is worth.
Funding fee: A one-time VA charge on most VA loans. You can finance it into the loan, and exempt veterans, such as those receiving disability compensation for a service-connected condition, do not pay it.
Entitlement: The amount of guaranty VA gives a lender on your loan. It is what lets lenders offer 100% financing.
Net tangible benefit: A test showing the new loan actually helps you. Eight ways to pass it.
Residual income: What is left of your monthly income after taxes, debts, and housing costs. On VA loans, this is the controlling test.
What Is the “Full-Value Cap,” Really?
The cap is the rule that your new loan, fee included, cannot exceed 100% of reasonable value. It comes straight from 38 CFR 36.4306, which says the new loan may not exceed 100 percent of the dwelling’s reasonable value as VA determines it.
That ceiling is VA’s. It is not a promise from every lender. Many lenders set a lower limit by their own policy, and that is a lender choice, not a VA rule.
The cap has a history. Congress set a 90% limit in 1989, according to the Federal Register notice VA published in late 2018. The rule changed for applications taken on or after February 15, 2019, per a VA program notice 26-18-30. Since then, 100% is the ceiling.
Where the 90% Figure Fits
The 90% number still floats around, and it causes real confusion. It is no longer the borrowing limit. It is one of eight ways to pass the net tangible benefit test. A loan at or under 90% of reasonable value leaves you at least 10% equity, which VA said gives room for a loan modification if your income dips.
The 100% ceiling stays in place for the loan itself, so 90% is not a cap on everyone. It is only a benchmark that can help a loan show a net tangible benefit.
How the Loan Is Underwritten, Step by Step
This is a full-credit loan, not a streamline. Here is the sequence across the wholesale programs Lendmire works with.
1. Confirm eligibility. You need a Certificate of Eligibility from VA. Service requirements are VA’s rules.
2. Pick the type. a VA program notice 26-19-05 defines two. Type I means the new loan, fee included, does not exceed the payoff, so no cash comes out. Type II means it does exceed the payoff, and you take cash.
3. Order the VA appraisal. It sets reasonable value. Because the cap is a percentage of that number, a low appraisal lowers your ceiling dollar for dollar.
4. Run the net tangible benefit test. The lender gives you a comparison of the old and new loan. The new loan must meet at least one of VA’s listed criteria.
5. Underwrite the file. Credit, income, and residual income all get checked. The wholesale programs we place VA files with start at a 580 decision score. VA itself sets no minimum.
6. Check seasoning. This applies only when the loan being paid off is a VA loan.
7. Close on the new loan. The old loan is paid off, and any cash goes to you.
One point on step 5: the 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it needs residual income well above the VA table to work.
The Cash Math, in Percentages
Skip the guesswork. Here is the formula.
- Start with 100% of reasonable value.
- Subtract your current payoff.
- Subtract any other liens being cleared.
- Subtract the financed funding fee.
- Subtract any financed closing costs.
- What remains is your cash.
Run it with ratios. Suppose your home appraises at a number and you owe 60% of it. You have 40% of value as paper equity. The funding fee on a first-use cash-out is 2.15% of the loan, and a subsequent use is 3.3%. Financed closing costs take another slice. Your cash lands noticeably below that 40%.
The fee is financed, so it counts toward the 100%. A fee that looks small still shrinks your cash and grows your balance. Exempt veterans skip the fee, which leaves more room.
Now compare two borrowers on the same house. One owes 60% of value and is a first-time user. The other owes the same but is on subsequent use. The second borrower pays the higher fee tier, so the second borrower nets less cash from identical equity. Entitlement history changes the math.
Structures and Variations
Non-VA to VA. The cash-out can refinance a conventional or FHA loan into a VA-backed loan, as VA’s cash-out page explains. Seasoning tied to VA-to-VA loans does not apply, though a lender may add its own wait. For many borrowers, the real win here is dropping monthly mortgage insurance. VA loans carry none, and removing it is one of the eight benefit tests.
VA to VA. Seasoning is the later of 210 days from the first payment or the sixth payment. Some borrowers expect cash-out to reset everything. It does not.
Cash-out vs. IRRRL. The streamline refinance (IRRRL) lowers a rate or converts adjustable to fixed with no VA appraisal. It cannot pull cash. If you need cash, you need a true cash-out with an appraisal and full underwriting. The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL and do not apply to the cash-out.
Where the Rule Breaks
Lender overlays. This is the most common surprise. VA allows 100%, and some lenders stop short of it. Ask before you pay for an appraisal whether the lender applies its own cap.
Low appraisal. If value comes in short, your ceiling drops. Your options are a reconsideration of value, borrowing less, or walking away. Plan for the possibility that the number is lower than you expect.
Occupancy. You must certify that you will live in the home. Rentals and investment properties do not qualify here. Occupancy decides the leverage.
Entitlement. A prior VA loan can leave you with reduced entitlement. That can affect how much a lender will fund. Speak with a loan officer about your situation.
State rules. State rules can add limits on home-equity cash-out, so check yours.
Credit floors. Some lenders set a higher credit floor than ours. A 580 floor on our wholesale programs is not a market-wide number.
Is Using All the Equity a Good Idea?
Sometimes. Often, no.
At 100% of value, you hold zero equity cushion. If prices dip, you could owe more than the house is worth. VA’s own reason for treating 90% as a benefit is that retained equity gives you room to recover. The National Consumer Law Center argued in 2019 comments that loan-to-value alone does not show a borrower is better off. That is an advocacy view, but it is worth weighing.
A bigger balance usually means a bigger payment, too. And rolling costs into the loan raises the balance while lowering your cash. Another thing to price in: if you give up a low existing loan to pull cash, you lose that loan.
Three questions help you decide:
- What is the cash for, and does it pay for itself?
- Can your budget carry the larger balance with residual income to spare?
- Would a smaller cash-out, say to 90% of value, get you what you need and leave a cushion?
Many borrowers find the partial cash-out is the better fit. You use the cap as a ceiling, not a target.
Cash-Out Choices Compared
| Option | Equity cushion | Mortgage insurance | Main tradeoff |
|---|---|---|---|
| VA cash-out to full value | None | None | Largest balance |
| VA cash-out kept near 90% | About 10% | None | Less cash |
| Conventional cash-out | Varies by lender | Depends on equity | Different caps |
| Keep current loan | Unchanged | Unchanged | No cash |
Frequently Asked Questions
Can I really borrow 100% of my home’s value?
Yes, under VA’s rule, including the financed funding fee. Some lenders cap lower by their own policy, so ask before you order an appraisal. Your actual cash is less than 100% of value once the payoff and costs come out.
Does the funding fee come out of my cash?
If you finance it, it adds to the balance and counts toward the cap, which reduces your cash. Veterans who are exempt do not pay it. The fee is set by VA, and the VA funding fee page has the current details.
Can I switch from an FHA or conventional loan?
Yes. A VA cash-out can refinance any loan type into a VA-backed loan. The VA-to-VA seasoning rule does not apply, though a lender may add its own wait.
Do I have to live in the home?
Yes. You certify that you will occupy it personally. Rentals and investment properties do not qualify.
Can an IRRRL pull cash out?
No. The streamline only lowers a rate or converts adjustable to fixed. Cash requires a separate cash-out loan with a VA appraisal and full underwriting.
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. All program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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
2. Federal Register 2018-27263
5. VA.gov, Cash-out refinance loan
7. VA.gov, Funding fee and closing costs
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: Banks That Offer a VA Cash-Out Refinance With Little Equity · How Much a VA Cash-Out Lends on a Fourplex With High DTI · How Much Cash Comes Out of a VA Cash-Out Refinance When Borrowing at a High LTV?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.