The Quick Read: A VA cash-out refinance replaces your current mortgage with a new VA-backed loan and lets you take cash from your equity. It reaches up to 100% of the appraised value, with the funding fee financed inside that cap. You need a certificate of eligibility, a VA appraisal, full credit and income underwriting, and a net tangible benefit. Minimum credit scores, loan caps and occupancy checks sit mostly at the lender level.
Key Takeaways
- The loan runs through a private lender, not through VA directly. VA’s own cash-out page says so, and it also warns about misleading refinance offers.
- You can refinance any loan type into VA, including FHA, USDA and conventional loans.
- Full underwriting applies. Residual income is the controlling test.
- Each cash-out must meet a net tangible benefit, and the lender must disclose what the loan does to your equity.
- The funding fee is 2.15% on first use and 3.3% on later use, unless you are exempt.
Lendmire’s VA cash-out refinance program page covers the program in more detail. Lendmire is a mortgage broker. It arranges these loans through wholesale lenders and does not lend itself.
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: 7.24% as of October 29, 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.
What Is a VA Cash-Out Refinance?
It is a new loan that pays off your old one. The new loan can be larger than the payoff, and you receive the difference as cash. Or it can simply move a non-VA loan into the VA program.
Two things set it apart from other refinances.
- It needs a VA appraisal. The appraisal sets the reasonable value, and the loan amount is capped by that value.
- It needs full underwriting. Credit, income, debts and residual income are all reviewed.
It is not a streamline. The streamline (the IRRRL) refinances an existing VA loan to a lower rate or from adjustable to fixed. It needs no VA appraisal and carries a 0.5% fee unless you are exempt. A cash-out is a different product with different tests.
How Is the Loan Underwritten, Step by Step?
Here is the order a file moves through.
1. Eligibility. Your certificate of eligibility (COE) from VA decides whether you qualify. Service requirements are VA’s rules, and the lender does not change them.
2. Application and full underwriting. The lender pulls credit, verifies income and employment, and lists your debts. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the VA table.
3. VA appraisal. The lender orders it through VA’s system. The appraised value sets your ceiling, and the cash you can take depends on it.
4. Loan classification. The loan is sorted into Type I or Type II. Per VA Circular 26-19-05, Type I means the new loan, including the funding fee, does not exceed the payoff of the old one. Type II means it does. VA’s system sorts this automatically.
5. Net tangible benefit. The new loan must be in your financial interest. The lender runs this test and gives you the results.
6. Disclosures. You receive a side-by-side comparison of your current loan and the new one. You also receive a statement showing how the refinance affects your home equity. These come in addition to the standard Loan Estimate and Closing Disclosure.
7. Closing. The lender completes the loan and VA backs it.
What Do VA and the Lender Each Require?
Many borrowers blame “VA rules” for what are actually lender rules. The split matters.
| Requirement | Who sets it | What to show |
|---|---|---|
| Certificate of eligibility | VA | COE |
| Appraised value, 100% cap | VA | VA appraisal |
| Net tangible benefit | VA | Lender’s benefit test |
| Seasoning | VA | Payment history |
| Minimum credit score | Lender | Credit report |
| Lower caps below 100% | Lender | Lender guidelines |
VA sets no minimum credit score. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Lenders may set a higher floor, and some cap cash-out below 100% of value. Those are lender overlays, subject to lender guidelines and full file review.
How Much Can You Borrow?
You can borrow up to 100% of the appraised value, and the financed funding fee counts inside that cap. VA Circular 26-19-05 states that VA will not back a refinance when the loan-to-value ratio exceeds 100%. Before the 2018 rule change, the cap was 90%, as the Federal Register notice explains. Many people still quote the old figure.
There is no VA loan limit with full entitlement. The wholesale programs Lendmire places VA loans with serve amounts up to $4,000,000 with full entitlement. If you have remaining entitlement only, a down payment may apply. Speak with a loan officer about that case.
Here is a worked example in percentages. The home appraises at its full value. The new loan is set at 100% of that value, and the 2.15% funding fee is financed inside that cap. The old loan payoff, closing costs and the financed fee all come out of the same 100%. Your cash is what remains. The fee takes a bite out of the headline number, which is why the fee is worth modeling first.
What Is the Net Tangible Benefit Test?
The test asks whether the new loan helps you financially. It applies to every VA cash-out. 38 CFR 36.4306 is the rule behind it. VA lists eight qualifying benefits, and the loan has to meet one. Examples include:
- Removing monthly mortgage or guaranty insurance.
- A new loan at or below 90% of reasonable value.
- Moving an adjustable-rate loan into a fixed-rate one.
- A shorter loan term.
The 90% figure survives here, as one option among the eight. It is not the borrowing cap.
VA’s stated purpose for the test is to stop imprudent lenders from taking advantage of veterans and the investors who fund VA-backed loans. The benefit test is also why you get a comparison of the old and new loans. If the lender cannot show you a benefit, the loan does not go forward.
One common mix-up deserves a flag. The half-percent rate-reduction test and the fee-recoupment test are IRRRL rules. They do not apply to the VA cash-out. Some online guides blend the two products together. If a guide tells you a cash-out must pass a recoupment period, it is describing the streamline.
How Does Seasoning Work?
Seasoning means the loan you are replacing must be old enough. The standard is the later of 210 days from the first payment and the sixth payment made. A cash-out carries the same seasoning test as the IRRRL.
The test looks at the payment record on the loan being refinanced. A lender will want to see the payments on file. On a loan that is not VA-backed, the lender confirms how the clock applies to your situation. Ask your loan officer to check this before you pay for an appraisal.
What About a Home You Own Free and Clear?
This is the question the web answers inconsistently. Some pages say a paid-off home cannot do a VA cash-out. Others say it can. A few hedge.
The honest answer is that the program is built as a refinance. A refinance replaces a loan, so the clean case is a home with a mortgage on it. A home with no mortgage has no payoff and no payment history to season. Whether a lender will structure a VA loan against owned-outright equity depends on that lender’s guidelines. Some will, some will not.
If you own outright, check three things before you apply:
- Ask whether the lender offers a VA loan against a home with no existing mortgage.
- Confirm how that lender treats seasoning when no loan exists.
- Compare the funding fee against other ways to reach your equity.
Do not assume either answer from a general article. Ask the lender and get it in writing.
Where Does the General Rule Break?
These are the edge cases that trip up files.
- Your current loan is not VA. A VA cash-out can refinance FHA, USDA or conventional loans into VA. The net tangible benefit test still applies.
- The home is not your primary residence. VA loans are owner-occupied by default. Occupancy decides the leverage, and a rental property does not qualify for this program.
- Active-duty or deployed borrowers. Lenders handle occupancy certification differently when you are away. Bring this up at application.
- The loan was modified. A modification adds special handling to payment-history reviews. Expect the lender to ask for the modification paperwork.
- A co-owner or trust is on title. Title situations such as a non-veteran spouse, an inherited home or a trust need a lender review before the file starts. They change who signs and which documents are required.
- The appraisal comes in low. The cap falls with the value.
What Does It Cost?
The funding fee is the main program cost. It is 2.15% of the loan on first use and 3.3% on later use. The VA funding fee schedule also says the reduced down-payment tiers on purchase loans do not apply to refinances. The fee can be financed into the loan.
Veterans receiving compensation for a service-connected disability, along with other exempt groups, do not pay it. Your COE shows whether you are exempt.
Closing costs are separate. They include the appraisal, title and lender charges, and they vary by file. Your Loan Estimate lists them.
Whether the fee is worth it for your situation is its own question. Lendmire’s piece Is a VA Cash-Out Refinance Worth the Funding Fee on a Primary Home? covers it.
What Happens to Your Budget and Equity?
The balance grows, so the monthly payment usually goes up. Interest accrues on the financed fee and costs too. At 100% of value, you have no equity cushion left. A dip in home prices could put you underwater.
Entitlement is also affected. Later use is priced at the higher 3.3% fee, which shows how VA treats repeated use. If you plan to buy another home with your VA benefit, ask how a cash-out changes the entitlement you have left.
Key Terms Defined
- Certificate of eligibility (COE): The VA document that confirms you qualify for the benefit.
- Reasonable value: The value from the VA appraisal, which sets the loan cap.
- Net tangible benefit: A test showing the new loan improves your finances in a way VA lists.
- Residual income: The money left each month after debts and living costs, which VA treats as the controlling test.
- Seasoning: The age and payment record the loan being refinanced must have.
- Funding fee: The VA fee charged on the loan, which can be financed unless you are exempt.
What If You Do Not Qualify?
| Problem | Why it happens | Next step |
|---|---|---|
| Fails benefit test | No listed benefit applies | Change the term or structure |
| Low appraisal | Value sets the cap | Request reconsideration |
| Below credit floor | Lender sets a minimum | Try another lender |
| High debt ratio | Residual income too thin | Pay down debts first |
| Not seasoned | Payment record too short | Wait for the window |
Getting Started
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. Bring your COE, your most recent mortgage statement, and a list of what you want the cash for. All programs are subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Frequently Asked Questions
Does VA set a minimum credit score for a cash-out refinance?
No. VA sets none. Lenders set their own floors. The wholesale programs Lendmire places VA loans with start at a 580 decision score, though some lenders set a higher number.
Can I use a VA cash-out to refinance a non-VA loan?
Yes. A VA cash-out can pay off an FHA, USDA or conventional loan and move you into VA. The net tangible benefit test still applies to you.
How much of my home’s value can I take out?
Up to 100% of the appraised value, with the financed funding fee included in that cap. Some lenders set a lower cap. The old 90% limit now survives only as one of the eight net tangible benefit options.
Is a VA cash-out the same as a streamline refinance?
No. A streamline refinances only an existing VA loan, needs no VA appraisal and carries a 0.5% fee. A cash-out needs a VA appraisal and full underwriting. It carries a 2.15% fee on first use and 3.3% after.
Do I owe the funding fee?
Usually, unless you are exempt. Veterans receiving compensation for a service-connected disability and other exempt groups do not pay. Your COE confirms whether you are exempt.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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
1. VA.gov: Cash-out refinance loan
3. Federal Register: Revisions to VA-guaranteed or insured cash-out home refinance loans
5. VA
6. VA Circular 26-23-06, Exhibit B (funding fees)
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: VA Cash-Out Refinance Requirements for a Roof · VA Cash-Out Refinance Requirements With a 740 Credit Score
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.