The Quick Read: A VA cash-out refinance can be done without bringing any money to closing, because the funding fee and closing costs can be rolled into the new loan, up to 100% of the appraised value. The loan still gets full underwriting, a VA appraisal, and a net tangible benefit test. It also works when you take no cash out at all, such as moving an FHA or conventional loan into VA.
What Does “Without Bringing Cash” Actually Mean?
The phrase carries two meanings, and the rules treat them differently. The first is no cash to close: you write no check at the table. The second is no cash back: the new loan only pays off the old one.
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.
| Item | Cash to close | No cash to close |
|---|---|---|
| Cash back to you | Possible if value is short | Standard cash-out |
| No cash back | Costs exceed the value cap | Costs rolled in, payoff only |
Most borrowers who search this phrase want the bottom-right box. That box is realistic for many files. It depends on the appraised value, your payoff, and the costs of the loan.
Here is the odd part. Under VA’s rules, a refinance from a non-VA loan into a VA loan counts as a cash-out refinance even when you take nothing out. VA’s cash-out refinance page says the product replaces your current loan, and that you can take cash from equity or refinance a non-VA loan into a VA-backed loan. So “cash-out” is the program’s name, not a promise that money changes hands.
Lendmire’s VA cash-out refinance program page covers the program overview.
Type I and Type II: The Split That Decides Your Cash Outcome
VA sorts every cash-out refinance into one of two types. The sort turns on one comparison: the new loan amount, including the financed funding fee, against the payoff of the loan you are replacing. VA Circular 26-19-05 sets out both definitions.
- Type I: the new loan, funding fee included, does not exceed the payoff. You get no cash back.
- Type II: the new loan, funding fee included, exceeds the payoff. The extra is your cash out.
The funding fee counts toward the loan amount when VA classifies the loan. So a borrower who rolls the fee in and still lands at or under the payoff has a Type I loan. Add one more financed cost that pushes the total past the payoff, and the loan becomes Type II.
Why does the type matter? Because some tests apply only to Type I, and some apply to both. We will get to those in a moment.
The Core Requirements, Step by Step
A VA cash-out is underwritten like any full-documentation mortgage. Having no cash back does not lighten the file. The steps below follow the order a file normally moves.
1. Eligibility. You need a certificate of eligibility (COE). VA decides eligibility, and the service rules are VA’s. You also need to meet the lender’s standards for credit and income.
2. Credit and income. VA sets no minimum credit score, but lenders do. Across the wholesale programs we place VA files with, the floor starts at a 580 decision score. Some lenders set a higher floor, so a score that works with one may not work with another.
Residual income is the controlling test. That is the money left each month after taxes, debts, 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.
3. Occupancy. This is a loan for the home you live in. The VA program is built for a primary residence, and occupancy decides the leverage available on the property.
4. Appraisal. A VA-assigned appraiser sets the reasonable value, and the home must meet VA’s minimum property requirements. The VA cash-out reaches 100% of the appraised value, including the financed fee. That cap is the number that decides whether your costs can be rolled in.
5. Seasoning. If you are refinancing an existing VA loan, the loan must be seasoned: the later of 210 days from the first payment and the sixth payment. Seasoning applies only when the loan being paid off is a VA loan. A borrower coming from FHA, conventional, or USDA does not face it, though a lender may add its own waiting period.
6. Net tangible benefit. Here is the legal heart of the loan. Under 38 CFR § 36.4306, the new loan must put you in a better financial position, and the lender must give you the benefit test. VA’s refinancing conference materials list eight qualifying benefits, and you need to meet at least one.
Two examples of a qualifying benefit fit the “no cash” borrower well. One is eliminating monthly mortgage insurance. The other is moving to a shorter term than the loan you are replacing. VA’s portal calculates the loan type and checks the benefit automatically, but the test must be met, not just disclosed.
How Closing Costs and the Funding Fee Work With No Cash
Closing costs are where “no cash” gets decided. The funding fee is financeable. So are the other costs of the loan, as long as the total stays within 100% of the appraised value.
The funding fee depends on your use of the benefit. For a cash-out refinance, VA reports the fee is 2.15% for first use and 3.3% for later use. Veterans receiving compensation for a service-connected disability, and the other exempt groups, are exempt from the fee.
The fee and costs raise the loan balance. A higher balance can raise your payment. That is why the benefit test exists.
Picture three hypothetical borrowers, described in percentages only.
Borrower one owes about 70% of the appraised value on an FHA loan. Rolling in the fee and costs lands the new loan well under the 100% cap. Nothing comes to closing, and nothing comes back. It is also a fit for the benefit test, because the FHA mortgage insurance goes away.
Borrower two owes about 80% of value and wants cash for repairs. The new loan, with fee and costs, sits above the payoff. That makes it Type II, and the difference reaches the borrower, still inside the 100% cap.
Borrower three owes close to 97% of value. The fee and costs would push the loan past 100%. Something has to give. Either the borrower brings cash for the difference, a lender or seller covers part of it where allowed, or the borrower waits for the value to catch up. Lenders may also cap leverage below 100%, so a borrower can hit this wall earlier than the VA rule would suggest.
Thinking out loud for a moment: the no-cash outcome is usually decided by equity, not by paperwork. A borrower with real equity almost never has to bring cash. A borrower with little equity almost always does.
The Recoupment Rule: Who It Applies To
Recoupment is the piece most often misapplied. It is the 36-month test.
Under the regulation, a Type I loan that refinances a VA loan must have its fees and costs recouped within 36 months. The recovery must come from lower regular monthly payments. Taxes, escrow amounts, and the funding fee are left out of the math. If the requirement is not met, the loan cannot be guaranteed.
The test does not reach every cash-out loan. It does not apply to a Type II loan, which is deemed recouped when the other requirements are met. And fee recoupment does not apply when the loan being paid off is non-VA.
One caution from the program mechanics we work with daily: the half-percent rate-reduction and fee-recoupment tests belong to the streamline (IRRRL). They never apply to the VA cash-out the way borrowers often assume. The cash-out is measured by the net tangible benefit and, for VA-to-VA Type I loans, the 36-month test.
Who Sets Which Rule?
Borrowers often mistake a lender policy for a VA rule. This table separates them.
| Topic | VA rule | Lender decides |
|---|---|---|
| Max loan vs. value | Up to 100% of value | May cap lower |
| Credit score | No minimum set | Sets its own floor |
| Seasoning | VA-to-VA only | May add its own |
| Net tangible benefit | Required | Applies the test |
| Underwriting | Full review | Overlays on top |
One more point on structure: you do not get a VA loan from VA. A private bank, mortgage company, or credit union makes it. Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders and never lends directly.
Entitlement and Mortgage Insurance
A VA loan carries no mortgage insurance of any kind. That is the benefit behind many no-cash refinances, especially from FHA.
With full entitlement, there is no VA loan limit. With remaining entitlement, a down payment may be required, so a borrower in that position should speak with a loan officer. Entitlement is worth checking before you refinance, because a cash-out paying off a loan can affect what is available on a future VA purchase.
A Quick Self-Check
Run through these before you apply.
1. Do you have a COE, or can you get one? 2. Is the home your primary residence? 3. Is your current loan VA? If so, is it seasoned past the later of 210 days or six payments? 4. Does at least one net tangible benefit apply, such as dropping mortgage insurance or shortening the term? 5. Is your payoff plus the fee and costs at or below 100% of the likely appraised value? 6. Does your residual income support the new payment?
If you answer yes to all six, the “no cash” path is realistic, subject to lender guidelines and full file review.
When This Is the Wrong Tool
The streamline (IRRRL) is a different product. It is VA-to-VA only and cannot pay off other liens. It needs no VA appraisal, and its funding fee is 0.5% unless you are exempt. Do not treat the cash-out as “the same as a streamline.” If you only want a lower rate or a switch from adjustable to fixed on an existing VA loan, the streamline may fit better.
The cash-out is the right tool when you hold a non-VA loan, when you want cash, or when you need to remove mortgage insurance. Staying with your current loan is sometimes the best answer.
Key Terms Defined
Certificate of eligibility (COE): the VA document that confirms you earned the loan benefit.
Net tangible benefit: a test showing the new loan improves your financial position.
Seasoning: the waiting period between your old loan’s first payment and the new loan.
Residual income: the monthly money left after taxes, debts, and living costs.
Funding fee: a one-time VA charge that can be financed into the loan.
Recoupment: earning back the loan’s costs through lower payments within 36 months.
Frequently Asked Questions
Can I do a VA cash-out refinance and receive no cash?
Yes. Refinancing a non-VA loan into a VA loan counts as a cash-out even when you take nothing out. A Type I loan, where the new amount does not exceed the payoff, also gives no cash back. Full underwriting and a VA appraisal still apply.
Can I roll the funding fee into the loan?
Yes. The fee is financeable, and so are the other costs, up to 100% of the appraised value. Veterans receiving compensation for a service-connected disability, and other exempt groups, are exempt from the fee.
Does the 36-month recoupment rule apply to every cash-out?
No. It applies to Type I loans that refinance an existing VA loan. A Type II loan is deemed recouped, and a non-VA payoff is not subject to it. The net tangible benefit test still applies in every case.
Does VA set a minimum credit score?
No. Lenders set the floor. The wholesale programs we place VA files with start at a 580 decision score, though some lenders require more.
Is a cash-out the same as a streamline?
No. A cash-out needs full underwriting and a VA appraisal and can reach any loan type. The streamline is lighter, VA-to-VA only, and cannot pay off other liens.
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. Every figure here is subject to lender guidelines and full file review, and nothing 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
1. VA.gov — Cash-out refinance loan
4. VA Loan Guaranty Conference, Refinancing
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: Best VA Cash-Out Refinance Program to Refinance an Existing VA Loan · Best VA Cash-Out Refinance Program With VA Residual Income Requirements · How to Prepare a VA Cash-Out Refinance File for Approval
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.