The Quick Read: The fee is a one-time charge set by the VA, and it depends on whether you have used your VA benefit before. It is 2.15% of the new loan for first use and 3.3% for later use, per VA’s current fee schedule. A bigger down payment does not reduce it, and your old loan type (conventional or FHA) does not change it. Veterans who receive VA disability compensation, and some others, owe nothing.
Why a Conventional or FHA Borrower Pays the Cash-Out Fee
If your current loan is not a VA loan, the VA cash-out product is your only VA refinance option. That is true even if you take no cash home.
VA’s cheaper streamline product, the IRRRL, only refinances an existing VA loan. Its fee is just 0.5%. Many FHA and conventional borrowers hear “streamline” and assume it applies to them. It does not.
So the “cash-out” label describes the loan type, not what lands in your pocket. You can refinance a conventional or FHA loan into VA, take nothing out, and still pay the cash-out fee.
Three things decide the fee:
- The loan type (cash-out versus IRRRL).
- Whether you have used your VA benefit before.
- Whether you are exempt.
The old loan type, the down payment, and the amount of cash you take do not enter the percentage.
What Is the Fee Percentage?
The fee is a percentage of the new loan amount. VA publishes the schedule in Exhibit B of its funding fee circular.
| Situation | Fee (% of new loan) |
|---|---|
| Cash-out, first use | 2.15% |
| Cash-out, subsequent use | 3.3% |
| IRRRL (VA-to-VA only) | 0.5% |
Two cautions on that table. First, the VA sets these percentages, not HUD and not your lender. Second, the schedule has an end date written into it, and Congress can change the numbers. VA’s circular on the fee schedule is the authority. Check it before you rely on any figure.
Some pages still show the older 2.3% and 3.6% cash-out figures. Those belong to a superseded schedule. Skip them. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
What counts as “subsequent use”
A prior VA loan generally moves you into the higher tier. This can catch people off guard. Prior use can count even when the earlier VA loan is long gone. There is a narrow edge case for certain manufactured-home loans, so ask VA or your loan officer to confirm your tier before you plan around it.
Why a Down Payment Does Not Help Here
On a VA purchase loan, putting 5% or 10% down lowers the fee. That reduced-fee rule applies only to loans that purchase or construct a home. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
A refinance has no down payment. Leaving more equity in the house does not shrink the cash-out fee either. The percentage stays the same.
How the Refinance Works, Step by Step
Here is the path from a conventional or FHA loan to a VA cash-out loan.
1. Confirm eligibility and prior use. This sets your fee tier.
2. Pick the right product. For a non-VA loan, that is the cash-out refinance, with or without cash back.
3. Go through full underwriting. Expect a credit review, an income and debt review, and a new appraisal. Streamlines often skip the appraisal. A cash-out does not.
4. Size the loan. The new loan pays off the old one. It also covers any cash you want, closing costs you choose to finance, and the fee if you roll it in.
5. Close. You either pay the fee in cash or add it to the balance.
The occupancy rule lines up with FHA’s. A VA cash-out requires the home to be your primary residence. If the property is a rental or second home, this product does not apply. Occupancy decides the leverage and the program.
Pay the Fee in Cash or Roll It In?
You can do either. VA says the fee is generally paid at closing or included in the loan amount.
Rolling it in keeps cash in your pocket today. The trade-off is a larger balance, a higher payment, and more total interest over the life of the loan.
There is also a ceiling. VA’s own limit is 100% of the home’s reasonable value. A financed fee counts against that limit. If the total runs over, the overage has to be paid in cash. Many lenders set a lower cap of their own, so the cash you can pull out is often smaller than the VA limit suggests.
Consider a homeowner whose new loan lands near the lender’s cap. Every point of fee that gets financed is a point of room not available for cash back. Take the fee out of the cash, and the cash shrinks. Lendmire’s piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs walks through that waterfall in plain words.
What You Stop Paying: The Old Loan’s Insurance
The fee looks heavy next to a monthly premium. That is the wrong comparison. Look at what leaves your budget.
| Cost | FHA loan | VA cash-out |
|---|---|---|
| Upfront charge | 1.75% of base loan | 2.15% or 3.3% fee |
| Ongoing insurance | 0.15%–0.75% yearly | None |
| Paid how | Financed plus monthly | Financed or cash |
The FHA figures are the program’s published structure: an upfront premium of 1.75% of the base loan, plus an annual premium between 0.15% and 0.75% of the balance. The annual premium depends on term, loan amount, and LTV. On a thirty-year FHA loan above 90% LTV, it lasts the whole term. At 90% or below, it ends after eleven years. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A conventional borrower with less than 20% equity may be paying private mortgage insurance instead. The details vary by lender and policy.
The break-even idea
Think of it as time. The VA fee is a lump sum. The old insurance is a drip. The longer you keep the home and the loan, the more drips you avoid. A shorter stay tilts the math toward keeping what you have. A long stay favors the VA loan. Your loan officer can run both side by side using your actual numbers.
What About My FHA Upfront Premium?
Don’t count on a refund. HUD’s FHA fact sheet describes upfront premium refunds for FHA-to-FHA refinances. It also says that after the third year of insurance, no refund is due. HUD’s published refund rules apply to FHA-to-FHA refinances, so a switch to a VA loan generally leaves any unearned premium behind. Ask your servicer how the payoff looks on your loan.
Exemptions and Edge Cases
Some veterans are exempt from the VA funding fee. VA’s Buyer’s Guide says veterans receiving VA compensation for a service-connected disability are exempt. So are those who would receive compensation but for retirement or active-duty pay. VA also lists Purple Heart recipients still on active duty, among others.
Check VA for the full list. A few practical points:
- Pending claim. If your disability rating is not yet in place, tell your loan officer early. Some lenders note that a refund may be possible when compensation is awarded after closing. Ask VA, not a lender page, how that works.
- Seasoning. Waiting-period rules differ when the old loan is not a VA loan. Your lender confirms the rule for your situation.
- Other charges. Refinances may roll other allowable charges into the loan. The fee is usually the biggest VA-specific line, but not the only one.
- Rental or second home. Not eligible for this product, as noted above.
Compare Like With Like
The CFPB took action against a VA cash-out lender that compared the new loan’s principal and interest against the old loan’s principal, interest, taxes, and insurance. That made the new loan look cheaper than it was. The same action raised concern about repeated refinancing that stacks fee after fee.
Protect yourself with a simple test. Put both loans in the same format. Include taxes and insurance on both. Add the financed fee to the new balance. Then compare total cost over the time you expect to keep the home.
When This Refinance Is Not Worth It
The VA cash-out can be the wrong tool. Watch for these cases:
- You plan to move soon, so you will not recoup the fee.
- You are a subsequent-use borrower facing the higher tier, with a modest insurance cost on the old loan.
- You are close to the lender’s cash-out cap, and the fee eats most of your cash.
- You want a different structure, like a rate-and-term change or a home equity line.
The FHA path is the alternative. Lendmire’s FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. That is subject to lender guidelines and full file review. For a head-to-head view of the costs, see Lendmire’s piece VA Cash-Out Funding Fee vs Conventional Cash-Out Mortgage Insurance.
Key Terms Defined
Funding fee: A one-time charge on VA loans, set by the VA, that stands in for monthly mortgage insurance.
First use / subsequent use: First use means you have not used your VA loan benefit before. Subsequent use means you have, and the fee is higher.
Cash-out refinance (VA): A refinance of a non-VA loan, or a VA loan with cash back, into a new VA loan. The label does not require you to take cash.
IRRRL: VA’s streamline refinance, open only to borrowers who already have a VA loan.
Mortgage insurance: A cost that protects the lender on low-equity loans. FHA charges it as an upfront premium plus an annual premium.
Frequently Asked Questions
Does the fee change if I take no cash out?
No. Your fee depends on the loan type, your prior VA use, and any exemption. Refinancing a conventional or FHA loan into VA uses the cash-out product, so the cash-out percentage applies whether you take cash or not.
Can I roll the fee into the new loan?
Yes. VA allows the fee to be financed or paid in cash. Financing raises your balance and the interest you pay over time. It also counts against the VA loan ceiling, and any excess must be paid in cash.
Do I owe the fee again if I refinance again?
Generally, yes, unless you are exempt. Each new cash-out can carry its own fee, and a prior VA loan puts you in the higher subsequent-use tier. That is why repeated refinancing can add up.
Is the fee tax-deductible?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Will I get my FHA upfront premium back?
Probably not. HUD’s published refund rules cover FHA-to-FHA refinances, and the refund ends after the third year of insurance. Ask your servicer what applies to your loan.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA Circular 26-23-06, Exhibit B (current schedule)
2. VA Circular 26-23-06, Funding Fee Charge Update
3. VA Circular 26-23-06, Exhibit A (superseded schedule)
4. VA News, funding fee deduction
5. HUD FHA Homeowners Fact Sheet
6. VA Home Loan Guaranty Buyer’s Guide
7. CFPB took action against a VA cash-out lender
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 FHA Cash-Out Insurance Costs Versus Conventional by Equity · Cash-out Refinance With An Existing FHA Loan: Stay FHA Or Switch To Conventional? · Conventional Cash-Out vs FHA Cash-Out for a Current FHA Homeowner
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.