The Quick Read: On a VA cash-out refinance, allowable closing costs can come out of the loan proceeds, so most veterans bring little or no cash to closing. The catch is the ceiling. The new loan, including any financed funding fee, has to fit under 100% of the appraised value. Every dollar you roll in comes out of your cash or your remaining equity.
Key Takeaways
- The “VA only lets you roll in the funding fee” rule applies to purchase loans, not refinances.
- The new loan covers your payoff, allowable costs, the financed funding fee, and any cash to you. All of it must fit under 100% of appraised value.
- Cash-out refinances need full underwriting, a net tangible benefit, and an appraisal.
- Rolled-in costs are not free. They raise your balance and the interest you pay over time.
What Does “Cash-Out” Actually Mean at VA?
“Cash-out” names the product, not what lands in your pocket. VA describes this loan as one that replaces your current loan with a new one under different terms. You can use it to take cash from equity. You can also use it to move a non-VA loan, such as FHA, USDA or conventional, into a VA-backed loan.
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.
Plenty of borrowers do the second thing and take no cash at all. They still have a “cash-out” refinance on paper. That matters because it changes which rules apply to you.
You must hold a VA Certificate of Eligibility (COE) and plan to live in the home you are refinancing. The COE comes from VA, and the service requirements are VA’s rules. Loans come from private lenders, not from VA directly. Lendmire’s VA cash-out refinance program page lays out how a broker places these files.
Can Closing Costs Be Rolled Into a VA Cash-Out Refinance?
Yes, on a cash-out refinance allowable fees and closing costs can be paid from the loan proceeds. VA’s consumer news page says cash-out loans typically need no cash at closing from the veteran. It also warns that financing costs raise the balance and the lifetime interest.
So why do some pages say VA only lets you roll in the funding fee? Because that is the purchase-loan rule. On a purchase, VA says you can finance only the VA funding fee. Refinances run on different rules.
Two phrases get blurred, so here is the difference:
- Rolled in: the cost is added to the new loan balance.
- Paid from proceeds: the cost is deducted from the equity cash you would otherwise receive.
Either way, the money comes from your equity. Your Loan Estimate and Closing Disclosure show which one is happening on your file.
How the New Loan Gets Sized, Step by Step
Think of the loan as a stack. In a typical VA refinance, the order usually runs like this:
1. Payoff of the old loan.
2. Allowable closing costs.
3. The financed VA funding fee.
4. Any cash you want in hand.
The total must fit under the ceiling. The VA cash-out refinance allows a loan of up to 100% of the appraised value, including the financed fee. VA’s program page also describes refinancing up to 100 percent of appraised value.
The practical consequence is simple. Say your payoff plus costs plus fee already sits near the ceiling. Then there is little or no cash left for you. Rolling in more costs shrinks the check dollar for dollar.
The lender orders the appraisal, and VA sets the reasonable value that caps the loan. A low appraisal squeezes everything above it in the stack.
What the Lender Checks Before Approving the File
Cash-out is not a streamlined product. Expect full underwriting: credit, income, employment and assets, all documented.
Here is what drives the outcome:
- Credit. VA sets no minimum credit score. The wholesale programs Lendmire places VA loans with start at a 580 decision score, and some lenders set a higher floor.
- Residual income. This is the controlling test. It is the money left each month after your major obligations and living costs. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
- Appraisal and reasonable value. These set the ceiling.
- Net tangible benefit. More on this next.
- Lender overlays. Many lenders add their own limits on top of VA’s. Subject to lender guidelines and full file review.
The Net Tangible Benefit Test
A net tangible benefit means the new loan is in your financial interest. Under 38 CFR 36.4306, the lender must give you the test, and the test must be satisfied. The loan has to meet one of VA’s eight listed benefits.
The list includes eliminating monthly mortgage insurance, a shorter term, and an increase in monthly residual income. If you are leaving an FHA loan, dropping its mortgage insurance is often the benefit that qualifies the file. A lender can decline a cash-out refinance for failing this test even when you have plenty of equity.
You may hear about a 90% loan-to-value limit. VA’s rulemaking built a 90% criterion into the test for certain loans that include added loan costs, so the resulting balance must stay at or below that level in those cases. That is not the same as a general cap. The VA ceiling is 100% of reasonable value including the financed fee, though many lenders choose to stop lower.
The half-percent rate-reduction test and the fee-recoupment test belong to the IRRRL, VA’s streamline loan. They do not apply to the VA cash-out.
The Funding Fee Rides Along
The VA funding fee on a cash-out refinance is 2.15% for first use and 3.3% for subsequent use. It is financeable, and it is waived for veterans receiving compensation for a service-connected disability and the other exempt groups. VA’s fee chart shows these figures and notes that reduced down-payment rates do not apply to refinances. Confirm the current figure on VA’s funding fee page before you rely on it.
Two points trip people up:
- Having equity does not lower the fee. The 1.5% and 1.25% tiers are purchase-loan tiers.
- The fee applies to the whole new loan. A bigger loan, including rolled-in costs, means a bigger fee.
Some people read that as a loop, and it is. Rolling in costs enlarges the balance, which enlarges the fee, which takes more room under the ceiling.
Where the General Rule Breaks
Moving a non-VA loan into VA. This is allowed, and no cash back is required. The seasoning requirement is the later of 210 days from your first payment and the sixth payment, and the VA cash-out carries it too. Seasoning is the waiting period before you can refinance a new loan.
Cash-out versus the IRRRL. 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 exempt. It is VA-to-VA only, and it treats closing costs differently. If you want cash, or you hold a non-VA loan, the IRRRL is not available.
Cash-out as a “no cash needed” loan. Plenty of people can close with nothing out of pocket. That does not mean nothing was paid. It means the costs were built into the balance.
Payment jumps. If your monthly payment rises sharply, the lender has extra steps to confirm you qualify. Keep this in mind when you size the loan.
Equity risk. Because the loan can reach 100% of value, a market dip could leave you owing more than the home is worth. That is the real price of using every dollar of equity.
State rules. Some states restrict cash-out refinancing, so it is worth asking your loan officer about yours.
Rolling In Versus Paying Out of Pocket: How to Decide
Run a simple comparison. A veteran with a non-VA loan wants out of mortgage insurance and has no spare cash. Rolling in the costs gets the file done with nothing at closing. Paying them from savings keeps the balance, the fee and the lifetime interest lower.
The questions that settle it:
- Do you need the cash, or only the loan change?
- How much room is left under the 100% ceiling after payoff, costs and fee?
- How long will you keep the home and this loan?
- Does the net tangible benefit hold up on its own, without leaning on rolled-in costs?
If you plan to hold the loan a long time, interest on a bigger balance adds up. If you may sell or refinance soon, the extra balance matters less. Honestly, this one is a toss-up for many borrowers, and it comes down to how much equity cushion you are comfortable giving up.
What to Check on Your Disclosures
Before you sign, compare the Loan Estimate and Closing Disclosure from more than one lender. Look for these:
- The total loan amount against the appraised value.
- Whether the funding fee is financed or paid, or waived by your exemption.
- Which costs were added to the balance and which came out of your proceeds.
- The cash to you, if any, after everything is stacked.
VA also publishes a warning about refinancing offers in its home loan menu. If an offer promises “no closing costs,” the costs are still there. They are built into the balance or the pricing.
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 confirms you qualify for a VA home loan.
Funding fee: a one-time VA charge on most VA loans that can be financed into the balance.
Net tangible benefit: the test showing the new loan is in your financial interest.
Residual income: the money left each month after major obligations and living costs.
Reasonable value: the value VA sets through the appraisal, which caps the loan.
Seasoning: the waiting period between your first payment and a later refinance.
Frequently Asked Questions
Can I roll all my closing costs into a VA cash-out refinance?
Allowable costs can generally be paid from the loan proceeds. Some charges are not allowable, and the total must stay under 100% of the appraised value including the financed funding fee. Your Loan Estimate shows what is included.
Does a VA cash-out refinance have a 90% limit?
Not as a general VA cap. Many lenders also stop short of 100% on their own. The VA ceiling is 100% of the appraised value including the financed fee.
Do I have to take cash out?
No. You can refinance a non-VA loan into a VA loan and take nothing. VA still calls it a cash-out refinance because of the product type.
Is the VA funding fee lower if I have a lot of equity?
No. On a cash-out refinance, the VA funding fee does not change based on how much equity you have. Veterans who are exempt from the fee do not pay it.
How is this different from an IRRRL?
The IRRRL is VA-to-VA only and needs no VA appraisal. A cash-out needs an appraisal and full underwriting, and it can take cash or convert a non-VA loan.
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. 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
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see VA loan programs.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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 News – You could be losing thousands on your home loan
2. VA – Cash-out refinance loan
3. VA – Funding fee and closing costs
4. VBA – Purchase & cash-out refinance page
7. VA Circular 26-23-06, Exhibit B
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 With a 740 Credit Score · Best VA Cash-Out Refinance Program With Closing Costs and the VA Funding Fee Included · VA Cash-Out Refinance Requirements for a Roof
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.