The Quick Read: A VA cash-out refinance comes down to three tests: how much the new loan can reach, how long an existing VA loan must age first, and what the funding fee does to the balance. The new loan can reach 100% of the home’s appraised value, with the financed funding fee counted inside that number. Seasoning applies only when the loan being paid off is itself a VA loan. Each figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Takeaways
- The cap is 100% of VA’s reasonable value, measured on the appraisal. The funding fee counts toward it.
- Seasoning is the later of 210 days from the first payment and the 6th payment. It applies to VA-to-VA files.
- The cash-out funding fee is 2.15% on first use and 3.3% after, waived for exempt borrowers.
- Residual income controls underwriting. The 41% debt-to-income figure is a guideline, not a hard cap.
- Lenders often set tighter limits than VA does. Those are overlays, not VA rules.
Requirements at a Glance
| Requirement | What it means | Who sets it |
|---|---|---|
| Cap | Up to 100% of appraised value, fee included | VA |
| Seasoning | 210 days and 6 payments, VA-to-VA | VA |
| Funding fee | 2.15% first use, 3.3% after | VA |
| Credit floor | 580 decision score on the wholesale programs used here | Lender |
| Occupancy | The borrower’s home | VA |
| Net tangible benefit | The new loan must help the borrower | VA |
VA sets no minimum credit score itself. The 580 figure is the floor on the wholesale programs Lendmire places VA files with. Some lenders set a higher one.
What a VA Cash-Out Refinance Is
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. You can take cash from your equity, or you can move a non-VA loan into VA. VA describes the product this way and lists the entry conditions: a Certificate of Eligibility, credit and income that meet VA and lender standards, and living in the home you are refinancing.
Any loan type can be paid off. Conventional, FHA, and VA loans all qualify as payoffs. Many borrowers assume they need an existing VA loan. They don’t. That is the VA streamline refinance, a different product.
Lendmire’s VA cash-out refinance program page covers how these files are arranged through wholesale lenders in the 16 states where Lendmire does consumer lending. Lendmire is a broker. It does not lend.
How Is the Cap Calculated?
The cap is 100% of reasonable value. Under 38 CFR 36.4306, the new loan cannot exceed 100 percent of the reasonable value of the home, as VA determines it. That value appears on the Notice of Value from the VA appraisal.
The funding fee sits inside that number. If you finance the fee, it adds to the loan amount. Any piece of the fee that would push the total above 100% must be paid in cash at closing.
Run it in percentages. Say the appraisal supports the home at 100% of value, and your payoff plus closing costs already use 96% of it. That leaves 4% of room for cash out and the financed fee together. If the fee alone takes more than that, the overage comes out of pocket.
Three points on the cap trip people up:
1. The appraisal sets the ceiling. A low appraisal cuts the cash available. It can also leave no room for the financed fee.
2. The 90% figure is not the cap. It shows up in one net tangible benefit test. Lenders and borrowers often mix it up.
3. Lender overlays are common. Many lenders stop short of 100%. That is their rule, not VA’s. Across the wholesale programs Lendmire works with, 100% is reachable, but each file is reviewed on its own.
On a low appraisal, you have three choices: take less cash, bring cash to closing to cover the gap, or wait and reorder later. A reconsideration request with recent comparable sales is a normal step, though it carries no promise of a different value.
Seasoning: When the Clock Applies
Seasoning applies only when the loan being paid off is a VA loan. A VA-to-VA cash-out must clear both conditions together: the first payment due date is at least 210 days before the new loan closes, and six consecutive monthly payments have been made. VA Circular 26-19-05 covers the lender certification tied to this. The statute behind it is 38 U.S.C. 3709.
Read it as “and,” not “or.” Some summaries say “whichever comes first.” VA’s wording is both. In practice the later of the two dates controls.
Here is how it plays out. Say your first payment came due on the first of a month. Count 210 days forward. Then count six payments. If six payments land before day 210, you still wait for day 210. If a skipped or late payment breaks the run, the six-payment count suffers too.
If you are paying off a conventional or FHA loan, VA seasoning does not apply. Some lenders add their own waiting periods, so ask.
Type I and Type II Files
The structure of the new loan decides which extra tests apply. A Type I cash-out is one where the new loan, funding fee included, does not exceed the payoff of the loan being refinanced. VA Circular 26-18-30 sets out that definition. A Type II brings cash back to the borrower.
| File type | Seasoning | Recoupment | Net tangible benefit |
|---|---|---|---|
| Type I, VA to VA | Yes | Yes | Yes |
| Type I, non-VA to VA | No | No | Yes |
| Type II, VA to VA | Yes | No | Yes |
| Type II, non-VA to VA | No | No | Yes |
That table is a working summary. Confirm the details against the VA Lenders Handbook (Chapters 6 and 8) for any file you are relying on.
Net Tangible Benefit and Recoupment
Every VA cash-out must show a net tangible benefit. VA Circular 26-19-05 confirms this applies to all cash-outs. The lender gives the borrower the test and a loan comparison.
Recoupment is narrower. It applies to Type I files that refinance a VA loan. Fees, expenses and closing costs must be recouped within 36 months, and the regulation requires that recoupment come through lower regular monthly payments.
The plain-words version is break-even. Add up the costs of the refinance. Divide by the monthly drop in payment. If the answer is longer than 36 months, the file fails recoupment. You are comparing like with like only when both payments include the same items. A payment showing only principal and interest next to an old payment that includes taxes and insurance is a false comparison. The CFPB ordered a lender to pay a $2.25 million penalty over comparisons like that. Ask to see the loan comparison line by line.
The Funding Fee
The cash-out funding fee is 2.15% on first use and 3.3% after first use, per VA’s funding fee page. Veterans receiving compensation for a service-connected disability, and the other exempt groups, owe none. The IRRRL fee is 0.5% unless exempt.
You can finance the fee or pay it in cash. Financing raises the loan balance, and that balance counts against the 100% cap. That is why the fee shows up in the cap math above. VA says the fee is what allows loans with no down payment and no monthly mortgage insurance.
The lender, not VA, sets the interest rate, points and other closing costs. Those are what you compare on the Loan Estimate. Cash-out refinances are consumer mortgages, so the Loan Estimate and Closing Disclosure apply.
Underwriting: Credit, Income and Residual
Residual income is the controlling test on VA files. It measures what is left each month after your debts and living costs. The 41% debt-to-income figure is a guideline. A ratio above it needs residual income well above the table, so a higher ratio can work with strong residual, and a lower one can fail with weak residual.
On credit, VA sets no minimum score. The wholesale programs Lendmire uses start at a 580 decision score. Some lenders require more. Your Certificate of Eligibility is the entry ticket, and VA decides that, not the lender. You can get it through a lender, on VA.gov, or by mail.
Documentation a file usually needs:
- Certificate of Eligibility
- Mortgage statement showing the payoff and the payment history
- Income documents for the borrower
- Homeowners insurance and property details
- Proof you live in the home
Where the Rules Break: Edge Cases
- Free-and-clear homes. Some lenders require an existing lien to pay off. That is a lender rule, not a VA rule. Ask early.
- Funding fee over the cap. Any overage is paid in cash at closing.
- Construction-to-permanent loans. VA’s rule covers refinancing construction loans whether or not the principal changes.
- State restrictions. Some lenders do not offer the product in certain states. Availability depends on the lender, not VA.
- Occupancy. A VA cash-out is for the home you live in, and occupancy decides the leverage.
- Low appraisal. The cap shrinks with the value. See the options above.
IRRRL or Cash-Out?
The IRRRL refinances an existing VA loan to a lower rate or from adjustable to fixed. It skips the VA appraisal and carries a 0.5% fee. It needs a VA loan to start with. The cash-out takes any loan type, requires an appraisal, and reaches equity. If you want cash or want to leave a non-VA loan, the cash-out is the route. Lendmire’s piece VA IRRRL vs VA Cash-Out: Choosing the Right VA Refinance walks through the choice.
Key Terms Defined
Reasonable value: The value VA assigns to the home, shown on the Notice of Value.
Seasoning: The waiting period on a VA loan before it can be refinanced into a VA cash-out.
Net tangible benefit: The test showing the new loan helps the borrower.
Recoupment: Earning back refinance costs through a lower monthly payment within 36 months.
Residual income: The money left each month after debts and living costs.
Certificate of Eligibility: VA’s document confirming your entitlement.
How the Decision Looks in Practice
Start with the payoff loan. If it is VA, check seasoning first. If it is not, skip that test. Next, check the appraisal against the cap, including the financed fee. Then check the break-even if the file is Type I VA-to-VA. Last, confirm residual income and credit against the lender’s floor.
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 on the home you live in, Lendmire can help you compare the programs and the equity each one reaches.
Frequently Asked Questions
Does a VA cash-out refinance cap at 90%?
No. The cap is 100% of reasonable value. The 90% figure appears in a separate test and is not the loan limit. Lower limits you may hear about are usually lender overlays.
Do I need an existing VA loan?
No. A VA cash-out can pay off a conventional, FHA, or other loan and move it into VA. The IRRRL is the product that requires an existing VA loan.
Does seasoning always apply?
Only when the loan being paid off is a VA loan. In that case the loan must be 210 days past its first payment due date and six consecutive payments must be made. Some lenders add their own waiting periods.
Can I roll the funding fee into the loan?
Generally yes, subject to the cap and lender guidelines. The fee can be financed, but any portion that would take the loan above 100% of reasonable value is paid in cash at closing. Borrowers who are exempt from the fee do not owe it.
Is there a minimum credit score?
VA sets none. The wholesale programs Lendmire places VA loans with start at a 580 decision score, and some lenders require more. All of it is subject to lender guidelines and full file review.
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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References
1. VA.gov: Cash-out refinance loan
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: VA Cash-Out Refinance Criteria for Choosing Over a Second Lien · How to Time a VA Cash-Out Around Seasoning After a Purchase or IRRRL · VA Cash-Out Seasoning Rules and When the Clock Starts
Brandon Miller
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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.