The Quick Read: For a veteran with a Certificate of Eligibility, a VA cash-out usually reaches more of the home’s value and carries no mortgage insurance. A conventional cash-out suits borrowers without VA eligibility, or those who want to keep VA entitlement untouched. Both turn equity into debt, and the new house adds a second payment on top. One caveat first: a VA loan on the next purchase requires you to live there, so a vacation home or rental has to be financed another way.
Side-by-Side
The table below compares how each refinance works in structure. Conventional terms vary by investor and lender overlay, so the right column is a general pattern, not a fixed rule.
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: 7.18% as of November 5, 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.
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Leverage | Up to 100% of appraised value | Lower; set by investor matrix |
| Credit floor | 580 decision score on our wholesale programs | Often higher; varies by lender |
| Mortgage insurance | None | Often applies at higher leverage |
| Funding fee | 2.15% first use, 3.3% after (exempt groups waived) | None |
| Occupancy | Primary residence | Primary, second home or investment |
| Eligibility | Certificate of Eligibility required | Open to any qualified borrower |
| Documentation | Full file; residual income decides | Full file; debt-to-income decides |
Every figure above is subject to lender guidelines and full file review, and nothing here is a commitment to lend. Credit minimums on the VA side come from the wholesale programs Lendmire places files with. VA itself sets no minimum score, but it expects you to meet your lender’s standards.
How Each Loan Turns Equity Into a Down Payment
Either way, the mechanics are the same. You replace the loan on the home you live in with a bigger one, pay off the old balance and costs, and receive the difference in cash. The CFPB describes a cash-out refinance as swapping your mortgage for a larger one and taking the gap as cash, often with closing costs.
The appraisal sets the ceiling. On a VA loan, the cap is the property’s reasonable value, and VA’s lender guidance also lists extra tests: a net tangible benefit, a comparison disclosure and seasoning when the loan being paid off is a VA loan. Lendmire’s VA cash-out refinance program page walks through the same pieces.
Across the wholesale programs we place files with, the VA cash-out reaches 100% of appraised value, funding fee included, and refinances any loan type into VA. The net tangible benefit must match one of VA’s eight listed benefits. The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL, a different product, and don’t apply here.
Then comes the second half. The cash is borrowed money, not savings. The lender for the next house counts the larger payment on your current home, the new payment and your other debts. Lenders also document where your down payment came from, so plan for a clean paper trail.
When VA Cash-Out Is the Better Fit
VA tends to win when the borrower holds a Certificate of Eligibility and wants maximum access to equity without mortgage insurance. Four situations stand out:
- Thin equity cushion. Conventional cash-out usually asks you to leave more equity in the house. VA can reach the full appraised value, which matters when the cash is the whole down payment plan.
- Credit that isn’t pristine. The VA programs we place start at a 580 decision score. Conventional files often want more, and mortgage insurance can get expensive as credit softens.
- Moving out of the house. Suppose you plan to keep your current home as a rental after you relocate. A VA cash-out refinance is something you want to complete while you still live there, so the cash is in hand before the occupancy changes.
- Residual income strength. VA’s controlling test is residual income, with 41% debt-to-income as a guideline rather than a cap. A borrower with a high ratio but a strong monthly cushion may fit VA better than a purely ratio-driven conventional file.
The funding fee is the cost of this structure. It can be financed, but it counts inside the 100% limit, so it trims the cash you receive. Veterans receiving compensation for a service-connected disability, and other exempt groups, don’t pay it.
Entitlement is the other question to settle. VA says you can use the benefit more than once, and that a lender may require a down payment depending on the loan amount and your remaining entitlement. A rule of thumb it gives is that lenders want enough entitlement left to guaranty about 25% of the new loan for zero down. Whether a VA cash-out on the home you’re keeping eats into that is something to settle with a loan officer before you plan the purchase. Don’t assume.
When Conventional Cash-Out Is the Better Fit
Conventional wins in a handful of cases, and they’re real ones.
- No VA eligibility. Without a Certificate of Eligibility, there is no VA loan.
- Strong equity and credit. With ample equity, the missing mortgage insurance on VA matters less, and a conventional loan has no funding fee. Compare the full cost picture on the Loan Estimate, not one feature.
- The next house isn’t a primary residence. VA states a VA loan can’t buy a vacation home, and misrepresenting occupancy intent can bring legal action. Conventional programs cover second homes and investment properties under their own occupancy rules. A VA cash-out can still supply the cash, but the purchase would need different financing. Keeping the two loans separate in that way can make the file simpler to document.
- Preserving entitlement. If you want your full VA benefit available for the next purchase, taking the cash through a conventional loan keeps that question off the table.
The tradeoff is leverage. Conventional cash-out typically caps lower, which means less cash from the same equity, and loan-level pricing adjustments can apply based on credit and loan-to-value. Fannie Mae’s cash-out refinance guidance points to its Eligibility Matrix for the limits, and that is one investor’s benchmark. Freddie Mac and individual lenders can differ. Conventional loans carry their own waiting periods too, typically a minimum age on the existing mortgage, so confirm the clock before you count on the timing.
Costs and Risks Both Options Share
Neither route is free money. The CFPB notes that a cash-out can lengthen your payoff time and raise your monthly payment, and that lenders typically want you to keep 10% to 20% of your home value as equity. Add a second mortgage payment for the new house and the monthly budget gets tighter than it looks on a single file.
Consider a borrower with a moderate balance and healthy equity who pulls cash for a 5% down payment. The refinance resets the clock on the old loan. The new purchase adds another payment. If either property’s value drops, the equity cushion on both thins. Run the combined monthly carrying cost before committing, not after. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Key Terms Defined
Certificate of Eligibility (COE): The VA document that confirms you qualify for the VA loan benefit.
Entitlement: The amount of guaranty VA backs on your loan, which affects how much you can borrow without a down payment.
Net tangible benefit: A test showing the refinance helps you in a defined way, such as a shorter term or higher residual income.
Residual income: The money left each month after major obligations, which VA treats as the controlling underwriting test.
Seasoning: The required waiting period before you can refinance, which on VA applies when the loan being paid off is a VA loan.
Funding fee: A one-time VA charge, financeable and waived for exempt borrowers, that is not a monthly premium.
The Verdict
Neither option is the answer for everyone. If you’re a veteran, plan to live in the next house and want the most equity access with no mortgage insurance, VA cash-out usually earns a hard look first, with entitlement checked up front. If you lack VA eligibility, want the next house as a second home, or want to protect your entitlement, conventional is the cleaner path, even if it reaches less equity.
Both are borrowing against your own house. The better question is often whether the second purchase fits your budget with two payments, not which refinance gets you the cash. 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.
Frequently Asked Questions
Can I use VA cash-out money to buy a vacation home or rental?
Yes, the cash is yours to use, but the purchase financing is a separate question. A VA loan on the next house requires you to occupy it as a primary residence, so a vacation home or rental needs a different loan type. Occupancy intent has to be truthful on the application.
Does a VA cash-out count against my entitlement for the next purchase?
It can affect it, and the answer depends on your loan amounts and remaining entitlement. VA says a lender may require a down payment on a second VA purchase based on those factors. Ask your loan officer to check this before you plan the sequence.
Is there a waiting period before a VA cash-out?
Seasoning applies when the loan you’re paying off is a VA loan: the later of 210 days from the first payment and the sixth payment. Some lenders add their own overlays, so confirm what your lender requires. Conventional loans have separate waiting periods.
Can I refinance a non-VA loan into a VA loan and take cash?
Yes. The VA cash-out refinances any loan type into a VA loan, subject to the net tangible benefit test, full underwriting and a VA appraisal. You need a valid Certificate of Eligibility.
Which loan leaves me with more cash from the same equity?
Generally the VA cash-out, because it reaches up to 100% of appraised value, while conventional cash-out typically caps lower. The VA funding fee, if it applies, comes out of that, so compare net cash on the Loan Estimate for both.
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.
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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
2. CFPB: What other loans are similar to a HELOC
4. VA News: use home loan benefit more than once
5. Fannie Mae Selling Guide B2-1.3-03
6. CFPB older Americans guide on home equity
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: How to Qualify and Apply for a VA Cash-Out Refinance Without an Escrow Account · How Lenders Underwrite a VA Cash-Out Refinance Without Selling the House
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.