The Quick Read: For most veterans with a home they live in, VA is the stronger cash-out tool. It reaches the most equity, carries no monthly mortgage insurance, and does not make you hit a conventional credit floor. Conventional fits veterans who lack the eligibility, want to keep VA entitlement untouched, or are cashing out on a second home or rental. A cash-out refinance replaces your current mortgage with a larger one and hands you the difference in cash.
Key Takeaways
- VA cash-out can reach up to 100% of the appraised value, with the funding fee included. Conventional cash-out stops lower, and the cap shrinks further on second homes and rentals.
- A VA loan carries no monthly mortgage insurance. Conventional cash-out can carry mortgage insurance, depending on leverage.
- VA charges a one-time funding fee, waived for exempt veterans. Conventional carries a pricing add-on tied to leverage and credit.
- VA cash-out only works on a home you occupy. Conventional can cover other occupancy types.
- Both options replace your whole current loan, so you give up its existing terms.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Leverage | Up to 100% of appraised value, fee included | Lower ceiling; varies by occupancy and units |
| Credit floor | VA sets none; wholesale programs start at 580 | Set by the program matrix; usually higher |
| Mortgage insurance | None | Can apply at higher leverage |
| Upfront cost | Funding fee 2.15% first use, 3.3% after | Pricing add-on tied to leverage and credit |
| Occupancy | The home you live in | Primary, second home, or rental (lower caps) |
| Documentation | Full underwriting; residual income controls | Full underwriting; debt-to-income drives it |
| Seasoning | Applies when refinancing a VA loan | Separate clocks on the loan and title |
| Loan ceiling | No VA loan limit with full entitlement | Conforming loan limits apply |
The funding fee is waived for veterans receiving compensation for a service-connected disability and for the other exempt groups. It can be financed into the loan, which is why it counts toward that 100% ceiling.
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.
How the Two Loans Actually Differ
Start with who makes the loan. VA backs the loan but does not make it. A private lender funds it, and you need a Certificate of Eligibility (COE), the document from VA that confirms your service qualifies. Lendmire’s VA cash-out refinance program page walks through the program from the broker side.
Both loans pull cash from equity. Both replace your current mortgage. Both require a full credit review and an appraisal. The differences sit in how far the equity reaches and what you pay for the privilege.
On a conventional cash-out, the lender stops well short of your full value. Fannie Mae’s Selling Guide ties maximum leverage and minimum credit scores to an eligibility matrix, and it applies a pricing add-on to certain cash-out loans based on leverage and credit. The matrix changes, so ask for the current one rather than trusting a blog.
A VA cash-out refinance can refinance any loan type into a VA loan. Your current loan does not have to be VA. That surprises many veterans who assume cash-out is only for people who already hold a VA mortgage.
When VA Is the Better Fit
VA wins when you live in the home, you are eligible, and you want the most equity access with the least monthly drag.
Picture a veteran with a conventional loan and a modest cushion of equity. Conventional cash-out might leave them short, or push them into mortgage insurance. A VA cash-out can reach up to 100% of the appraised value, and there is no monthly mortgage insurance at any leverage. That can matter a lot when the cash is going to pay off high-cost debt or fund a major repair.
VA also helps when credit has dings. VA sets no minimum score, and across the wholesale programs Lendmire places VA loans with, the floor starts at a 580 decision score. Some lenders set a higher floor on their own, so shopping matters. Conventional programs generally ask for more.
The income test is different too. On VA, residual income is the controlling test: what is 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. For a veteran with a heavy debt load but steady pay, that can be the difference.
There is one more VA-specific hurdle, and it works in your favor. Every VA cash-out must pass a net tangible benefit test. That means the new loan has to do something real for you, such as eliminating monthly mortgage insurance, shortening the term, or lowering the interest rate. The VA Lenders Handbook lays out the test and the seasoning rule. When you refinance an existing VA loan, you also have to clear a waiting period: the later of 210 days from your first payment and your sixth payment.
Now the cost side. The funding fee is real: 2.15% on a first-use cash-out and 3.3% after. Run it against the mortgage insurance you would pay conventionally and the pricing add-on a high-leverage conventional loan carries. Exempt veterans skip the fee entirely.
Documentation is mostly a lender question. VA notes that many, but not all, lenders ask for two years of tax returns.
When Conventional Is the Better Fit
Conventional wins in a handful of real situations, and pretending otherwise would be bad advice.
You are not eligible for VA. No certificate of eligibility (COE), no VA loan. Conventional is then the path, and FHA is another option worth a look.
The property is not your home. VA cash-out requires you to occupy the property. Conventional can cash out on a second home or a rental, at lower leverage caps than a primary residence. Occupancy is the first thing that sets the leverage for those properties, though credit and the number of units matter too.
You have lots of equity and want a clean, small draw. Say you owe well under half of what the house is worth and you need a modest sum. Conventional leverage caps are unlikely to get in your way at that level. The mortgage insurance question may be moot, because low leverage generally keeps it off the table. Then the VA funding fee is a cost you can sidestep by going conventional.
You want to keep VA entitlement untouched. A VA loan ties up entitlement while it is outstanding. If you plan to buy another home with VA later, moving the cash-out into a conventional loan may keep options open. How entitlement works for your situation is a question for a loan officer, because it turns on your remaining entitlement.
Your loan is a seasoned conventional loan with a strong balance sheet. If your credit is high, your leverage is low, and you are not exempt from the funding fee, the pricing gap can narrow. Run both options before assuming VA wins.
One caution applies to both. A cash-out refinance does not preserve your existing loan. Its terms vanish when the new loan replaces it, and if your current mortgage carries terms you value, that is a cost no table shows. The Consumer Financial Protection Bureau also points out that a cash-out can stretch out your payoff time and raise your monthly payment because a larger loan replaces the current one. It adds that lenders typically want you to keep 10% to 20% of your home value as equity on a cash-out. That is a general statement. VA can go higher than that.
Key Terms Defined
- Net tangible benefit: a test showing the new VA loan improves your position in a concrete way, such as no more monthly mortgage insurance or a shorter term.
- Seasoning: the waiting period a lender or program requires before you can refinance a loan or use a property.
- Funding fee: VA’s one-time charge, financeable into the loan and waived for exempt veterans.
- Residual income: the money left each month after your major obligations and basic living costs.
- Pricing add-on: an extra pricing adjustment on certain conventional cash-out loans, tied to leverage and credit.
The Verdict
Run the same home through both. If you are eligible and live in the house, VA usually reaches more equity with no monthly mortgage insurance, and its income test gives more room. Conventional earns its place when you are not eligible, the property is not your residence, you want to protect entitlement, or you are drawing a modest amount from a lot of equity.
Do not decide on the headline numbers alone. Compare the full Loan Estimate for each, including the funding fee or pricing add-on, and weigh what you give up by replacing your current loan. Then remember one protection on both: on a refinance of your home, you generally have until midnight of the third business day to cancel, and Saturdays count while Sundays and legal holidays do not.
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 program figure here is subject to lender guidelines and full file review, and nothing on this page is a commitment to lend.
Frequently Asked Questions
Can I refinance a conventional loan into a VA cash-out loan?
Yes. A VA cash-out can refinance any loan type into a VA-backed loan, including a conventional one. You still need a COE, a full credit review, an appraisal, and a net tangible benefit. The VA seasoning wait applies only when the loan being refinanced is itself a VA loan.
Does a VA cash-out refinance require mortgage insurance?
No. A VA loan carries no monthly mortgage insurance at any leverage. It carries the one-time funding fee instead, which is waived for exempt veterans and can be financed. A conventional cash-out can carry mortgage insurance at higher leverage.
Is there a minimum credit score for a VA cash-out?
VA itself sets none. Lenders add their own floors, and the wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher one, so a decline from one lender is not the end of the road. Approval depends on the full file.
Can I use a VA cash-out on a rental property?
No. VA requires you to meet the occupancy requirement, so it works on a home you live in. For a second home or rental, conventional programs apply at lower leverage caps.
What does VA mean by a net tangible benefit?
It means the new loan must help you in a concrete way. Examples include eliminating monthly mortgage insurance, shortening your term, or lowering your interest rate. Conventional cash-out has no equivalent VA-style test. Its limits come from leverage, seasoning, credit, and debt-to-income.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For your own numbers, request a scenario review with Lendmire.
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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. Fannie Mae Selling Guide, B2-1.3-03: Cash-Out Refinance Transactions
3. VA Lenders Handbook (VAP 26-7), Chapter 6, KnowVA
4. CFPB: Using home equity guide
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 Lenders Underwrite a VA Cash-Out Refinance for a Roof · VA Cash-Out Refinance vs Conventional Cash-Out on Closing Costs · How Lenders Underwrite a VA Cash-Out Refinance for Active-Duty Military and Veterans
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.