The Quick Read: The total depends on a few line items, and the VA funding fee is the largest VA-specific one. On a cash-out refinance it is 2.15% of the new loan for first use and 3.3% after first use, unless the borrower is exempt. You can pay that fee in cash or roll it into the loan. Rolling it in lowers the cash due at closing, but it uses up equity and adds to the balance you carry.
No single national figure covers every file. Costs shift with loan size, property type, state and how the lender builds the loan. The sections below break the total into parts so a borrower can read a Loan Estimate line by line.
Key Takeaways
- The funding fee is a percentage of the whole new loan, not of the cash you take out.
- A bigger down payment does not apply to a refinance, so it cannot lower the cash-out fee.
- Financing the fee cuts cash due at closing but raises the balance and the interest paid over time.
- The new loan, financed fee included, cannot go past 100% of the appraised value. Financed costs eat into the cash you can take.
- Other closing costs are limited to a permitted list under VA rules.
What Counts as Closing Costs on a VA Cash-Out?
Closing costs on a VA cash-out are the funding fee, the lender’s origination charge, third-party services, and taxes and prepaid items. VA tells borrowers on its own cash-out refinance page that closing costs can add up to thousands of dollars. Plan for that, not for “no closing costs.”
The charges fall into four groups:
| Group | What is in it | Who sets it |
|---|---|---|
| VA funding fee | Percent of new loan | VA |
| Origination | Flat charge, capped by VA | Lender, within VA’s cap |
| Third-party services | Appraisal, title, credit report, flood check, survey | Vendors |
| Taxes and prepaids | Recording, property taxes, hazard insurance | Government and insurers |
VA limits what a lender may charge a veteran on these loans. Under 38 CFR 36.4313, nothing may be charged to the borrower unless the rule expressly permits it. A lender may take a flat origination charge of up to 1 percent of the loan amount, and that charge stands in place of other origination-type costs that are not itemized in the schedule. The scheduled amounts are maximums, not set prices.
Common allowable items include the appraisal, recording, credit report, taxes and assessments, hazard insurance, survey, title exam and insurance, and the flood determination, per a VA program notice 26-17-11. The Closing Disclosure has to show them.
Across the wholesale programs Lendmire places VA loans with, the file questions that come up most are not the big items. They are the small ones: a payoff figure that changed, a prepaid amount that moved, an appraisal fee that differs from the first estimate. Read the Loan Estimate against the Closing Disclosure for those.
How Big Is the Funding Fee?
The cash-out funding fee 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. VA’s funding fee page is the place to confirm exemption status.
| Use | Cash-out refinance fee |
|---|---|
| First use | 2.15% |
| After first use | 3.3% |
| Exempt borrower | Waived |
| VA streamline refinance (for comparison) | 0.5% |
Two points trip people up.
First, the lower 1.5% and 1.25% tiers apply to purchase loans with a down payment. VA states that refinance fee rates do not change with a down payment. A cash-out borrower cannot buy the fee down that way.
Second, some older material shows higher cash-out figures. Those are out of date. Use the current VA table.
One edge case: if your only earlier VA use was buying a manufactured home, you still pay the first-use rate.
Three Ways to Pay: Cash, Proceeds or the Loan
You can pay the costs from your pocket, from the cash-out proceeds, or by adding some of them to the loan. Each choice moves a different number. Which items can go into the loan is the part where advice online disagrees, so keep the funding fee separate from everything else.
| Method | Cash due at closing | Cash you receive | Loan balance |
|---|---|---|---|
| Pay from pocket | Higher | Unchanged | Unchanged |
| Pay from proceeds | Lower | Smaller | Unchanged |
| Finance into the loan | Lower | Unchanged until the 100% cap | Higher |
The funding fee is the item VA lets you finance. Under the VA loan guaranty rules, the fee may be paid in cash or included in the loan, and a financed fee is disregarded when the fee itself is computed. So you do not pay a fee on the fee.
For the other costs, the practical read is that they come out of your pocket or out of the proceeds. Some secondary summaries say only the funding fee and energy-efficiency improvement costs can raise a cash-out loan amount. Ask the loan officer how a specific file will be structured, because the Loan Estimate will show it.
How Financing Changes the Numbers
Financing the funding fee lowers what you owe at the table, but it raises the balance, and a higher balance means more interest over the life of the loan. It also uses up room under the 100% ceiling.
Here is the mechanic. The new loan, with every financed fee included, may not exceed 100% of the property’s reasonable value. VA’s lender-call slides state this. The wholesale programs Lendmire works with reach 100% of the appraised value, financed fee included, so on a maxed-out file every financed dollar is a dollar of cash you do not take out.
Net cash to you follows a plain formula:
- Start with the new loan amount.
- Subtract the payoff of the loan being replaced.
- Subtract any other liens being cleared.
- Subtract the funding fee, if it comes out of proceeds.
- Subtract the other closing costs.
What is left is your net cash. Run it twice on any file: once with the fee financed, once paid in cash. The second version leaves a smaller balance and less interest. The first leaves more money in your account on closing day. Neither is right for everyone.
Picture a homeowner with a lot of equity who wants cash for a roof and a kitchen. If the loan sits well below the 100% ceiling, financing the fee costs nothing in lost cash, only added balance. Now picture a homeowner who wants every available dollar at 100% of value. Financing the fee cuts the cash out dollar for dollar. Same program, different answer.
Type I and Type II: Where the Rules Change
VA splits cash-outs into two categories. VA Circular 26-19-05 defines them. A Type I is a loan where the amount, funding fee included, does not exceed the payoff of the loan being refinanced. A Type II is a loan where the amount does exceed the payoff, which means the borrower takes cash.
The category matters because the extra tests differ.
- Net tangible benefit. Every cash-out must show at least one of eight listed benefits. Examples include a lower payment, a shorter term, or removing monthly mortgage insurance. VA lists them in Exhibit A to the circular.
- Seasoning. When the loan being paid off is a VA loan, the later of 210 days from the first payment and the sixth payment applies.
- Recoupment. A Type I refinance of a VA loan also has to show the fees and costs get recovered through lower payments. Lenders certify this.
- Disclosures. The borrower gets a cash-out comparison disclosure at application and again at closing.
A refinance from a non-VA loan into VA carries the net tangible benefit, the VA appraisal, the disclosures and the 100% ceiling. The seasoning step looks at the loan being paid off, so it applies only when that loan is a VA loan.
Where the General Rule Breaks
Most of the above holds on a standard file. A few cases do not follow it.
Exempt borrowers. Veterans receiving compensation for a service-connected disability do not pay the funding fee. For them the cost total drops, and the question of financing the fee goes away. Other exempt groups exist. Check VA’s page rather than a summary.
Prior VA use. Using entitlement before moves the fee from 2.15% to 3.3%. A borrower who used a VA loan once and now refinances pays the higher tier, which makes the financing choice weigh more.
The IRRRL. An interest rate reduction refinance is a different product. It refinances an existing VA loan, including moving from adjustable to fixed, carries a 0.5% fee, needs no VA appraisal, and cannot take equity out. If you want cash, it is not the tool.
State limits. Some states restrict how much equity a homeowner may borrow against. Those limits can sit below VA’s 100%.
Lender limits. VA’s ceiling is 100% of value, but individual lenders may set lower caps. The program is the envelope. The lender is the filter.
Alterations and repairs. VA’s Buyer’s Guide notes a cash-out can include alterations and repairs on a home you own and occupy.
Occupancy. You must live in the home. For active-duty borrowers, a spouse or dependent may satisfy that requirement.
What the Monthly Budget Does Not Include
A VA loan carries no mortgage insurance of any kind. VA’s housing fact sheet confirms VA loans do not require private mortgage insurance. For a borrower coming out of a conventional or FHA loan with monthly mortgage insurance, that can be a real net tangible benefit.
The refinance still resets the rate and the term. Compare the new loan with the old one on those two points, and on how much longer you will owe.
Underwriting on these files turns on residual income, which is what is left each month after debts and living expenses. 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 start at a 580 decision score, though VA sets no minimum score of its own. Some lenders set a higher floor. All of it is subject to lender guidelines and full file review.
Comparing Quotes Line by Line
The Loan Estimate is built to be compared. It splits costs into loan costs and other costs, and it shows “Closing Costs Financed” so you can see how much of the total is going into the balance. The CFPB’s explanation of the Loan Estimate covers how that line is calculated.
A short checklist for any quote:
- Confirm the funding fee tier matches your use history, or that it shows as waived if you are exempt.
- Check whether the funding fee is listed as financed or paid in cash.
- Look at the origination line and ask what it replaces.
- Separate services you can shop for from those you cannot.
- Compare the “Estimated Cash to Close” figure on each Loan Estimate, not only the totals.
- Ask how the 100% ceiling affects your net cash.
Closing costs and cash to close are not the same number. Cash to close also reflects payoff, prepaids and escrows, which is why two quotes with similar costs can show different cash due.
Key Terms Defined
Funding fee: A one-time VA charge, a percentage of the loan, that can be paid in cash or rolled into the loan.
Net tangible benefit: A measurable gain from refinancing, such as a lower payment or a shorter term, that VA requires you to show.
Type I cash-out: A VA cash-out where the new loan does not exceed the payoff of the old one.
Type II cash-out: A VA cash-out where the new loan exceeds the payoff, so the borrower takes cash.
Residual income: The money left each month after debts and living costs, which is the controlling VA underwriting test.
Seasoning: The waiting period before a VA loan can be refinanced, which applies when the loan being paid off is a VA loan.
Closing Costs Financed: The Loan Estimate line showing how much of your costs are paid out of the loan amount.
Frequently Asked Questions
Can I roll the VA funding fee into a cash-out loan?
Yes. VA lets the fee be paid in cash or included in the loan. Financing it lowers cash due at closing but raises the balance and the interest paid over time. It also counts toward the 100% of value ceiling, so it can shrink the cash you take out.
Does a bigger down payment lower my cash-out funding fee?
No. The reduced tiers apply to purchase loans. A cash-out borrower pays 2.15% for first use or 3.3% after first use, unless exempt.
Are there VA cash-out loans with no closing costs?
Not in the sense the phrase suggests. A “no closing cost” offer builds the costs into the balance or the rate, so you pay them over time. VA itself warns that refinance closing costs can add up to thousands of dollars.
Do I need a net tangible benefit?
Yes. Every VA cash-out must show at least one of eight listed benefits, such as a lower payment, a shorter term, or removing monthly mortgage insurance. A VA-to-VA Type I also needs a recoupment certification, and seasoning applies when the loan being paid off is VA.
Who does not pay the funding fee?
Veterans receiving compensation for a service-connected disability, and the other groups VA exempts. Confirm status on VA’s funding fee page and with the loan officer before the Loan Estimate is issued. 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 through the VA cash-out refinance program. For a look at how fees and costs reduce what lands in your account, see Lendmire’s piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs. Program figures 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
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.gov – Cash-out refinance loan
4. VA.gov – Funding fee and closing costs
6. VA: Aq42 Lender Call Jan2019
10. VA – Housing Assistance Toolkit fact sheet
11. CFPB – Loan Estimate regulation 1026.37
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: How to Get a VA Cash-Out in Texas Despite High Closing Costs · How Much a VA Cash-Out Releases on Restored or Partial Entitlement · How Much Entitlement an Active-Duty Member Keeps After a VA Cash-Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.