The Quick Read: A VA cash-out fits veterans who want to pull equity from the home they live in and want the most leverage with no monthly mortgage insurance. A conventional cash-out fits borrowers who are not VA-eligible, or who want an option that is not tied to VA’s occupancy and entitlement rules. The deciding question is the next house: VA wants you to live in it, and conventional can be more flexible about how you use it. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Who Each Option Is Really For
Both loans do the same basic thing. They replace the mortgage you have with a bigger one, and you keep the difference as cash. That cash can become the down payment on another house.
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.
The VA version is for eligible veterans, service members, and certain surviving spouses who live in the home being refinanced. Across the wholesale programs we place files with, it can reach 100% of the appraised value, including the financed funding fee. It carries no mortgage insurance of any kind.
The conventional version is open to any qualified borrower. It does not ask for a certificate of eligibility. It usually takes less leverage, and mortgage insurance can come into play at higher loan-to-value levels, depending on the program.
Think of the VA loan as the stronger tool for the right borrower, and conventional as the wider door.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Who can use it | Eligible veterans, service members, some surviving spouses | Any qualified borrower |
| Maximum leverage | Up to 100% of appraised value | Lower; set by the lender’s program matrix |
| Credit floor | 580 decision score on the wholesale programs we use | Set by program; often higher |
| Mortgage insurance | None | Can apply at higher leverage |
| One-time fee | Funding fee, waived for exempt borrowers | No funding fee |
| Occupancy | Must live in the refinanced home | Primary, second home, or investment, with tighter leverage |
| Documentation | Full income, credit, and residual income review | Full income, credit, and debt-to-income review |
| Eligibility proof | VA certificate of eligibility | None |
Two rows deserve a closer look: the funding fee and the credit floor. On a VA cash-out refinance, the funding fee is 2.15% for first use and 3.3% for later use. It can be financed into the loan, and borrowers who are exempt, such as veterans receiving compensation for a service-connected disability, do not pay it.
VA sets no minimum credit score itself. Lenders set their own, and the wholesale programs we place VA loans with start at a 580 decision score. Some lenders set a higher floor, so a “no” from one lender is not a “no” everywhere.
How a VA Cash-Out Actually Works
VA describes a cash-out refinance as replacing your current loan with a new one on different terms. You can take cash from your equity, or you can refinance a non-VA loan into a VA-backed one. A private lender makes the loan, not VA. You show that lender your certificate of eligibility, and you must live in the home you are refinancing.
Lendmire’s VA cash-out refinance program page lays out the program in more detail. The short version follows.
- Value ceiling. A VA appraisal sets the home’s reasonable value. The new loan can reach 100% of it, including the financed fee.
- Net tangible benefit. Every VA cash-out must show a real benefit to the borrower. VA’s Lenders Handbook lists several ways to meet it. One is a loan-to-value of 90 percent or less. Another is higher monthly residual income after the refinance.
- Seasoning. If you are paying off an existing VA loan, a waiting period applies. Paying off a non-VA loan works differently.
- Funding fee. The fee on a cash-out is 2.15% for first use and 3.3% for later use. It can be financed, and it is waived for veterans who receive compensation for a service-connected disability and for other exempt groups. VA’s funding fee page describes it as a one-time fee paid at closing.
- Residual income. This is the controlling test. It measures what is left each month after your debts and living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
You may also hear that VA caps cash-out at 90%. That is a common mix-up. The Handbook shows 90% as one way to prove a net tangible benefit. It is not a ceiling on the program. Individual lenders can still set lower limits of their own. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
How a Conventional Cash-Out Works
A conventional cash-out pays off your first mortgage and hands you the difference. The rules come from the investor’s guide. For loans sold to Fannie Mae, the Selling Guide’s cash-out topic points to an eligibility matrix for maximum loan-to-value and credit scores. It also says pricing adjustments apply to certain cash-out loans based on leverage and credit.
Seasoning is the waiting period before you can cash out. Under Fannie Mae’s guidance, the loan being paid off must be at least 12 months old, and at least one borrower must have been on title for six months. Fannie Mae’s announcement spells this out. Exceptions exist for certain ownership situations.
Conventional loans also run a full file review. Expect credit, income, and debt ratios to be checked. Reserves can be required on some files when the debt-to-income ratio runs high.
When a VA Cash-Out Is the Better Fit
A VA cash-out tends to win in a few situations.
You need maximum equity access. If you need every dollar your home can release, 100% of appraised value beats most conventional caps. That matters when the cash is a down payment and you have little else saved.
You want to avoid mortgage insurance. VA loans carry none. A conventional cash-out at higher leverage may add it. The VA funding fee replaces it, and the fee can be financed.
You hold a non-VA loan. A VA cash-out can refinance a conventional, FHA, or USDA loan into a VA-backed one. That can be useful if you are paying mortgage insurance today.
Your credit is on the thinner side. The wholesale programs we use start at a 580 decision score. Conventional programs often ask for more. Credit is only one piece, though, and residual income still has to work.
The next house is your next home. Here is the catch that decides many files. VA loans are for homes you will occupy. A second VA purchase is possible if you have enough entitlement left. Entitlement is the amount VA is willing to guarantee. VA’s guidance calls the benefit a lifetime one that can be remaining or restored. It also gives a rule of thumb: lenders want enough remaining entitlement to guarantee at least 25% of the new loan for zero down. If entitlement falls short, a down payment may be needed. Cash from a refinance can help cover that.
Picture the sequence. A veteran lives in a home with plenty of equity. They refinance with a VA cash-out, then use the cash as a down payment on a larger home. They move into the new home and keep the old one. Whether the numbers work depends on entitlement, residual income, and how both payments count in qualifying. Ask your loan officer to run that math before you commit.
When a Conventional Cash-Out Is the Better Fit
Conventional earns its place in a different set of cases.
You are not VA-eligible. No certificate of eligibility means no VA loan. Conventional is the practical path.
You want to leave VA entitlement alone. A conventional cash-out does not touch your VA benefit. If you plan to use VA for the next purchase and want to protect your remaining entitlement, this is worth discussing.
You do not need maximum leverage. If you have plenty of equity and only need a modest amount, the lower leverage of conventional may not hurt you. The cost of the VA funding fee may not be worth it for a small draw.
The next property will not be your residence. VA purchase and cash-out loans are for a home you will live in. Conventional financing can be used on second homes and investment properties, with leverage that tightens for them. Occupancy decides the leverage, and the answer you give a lender about how you will use a property must always be the honest one.
You qualify more easily on debt-to-income. Residual income is VA’s main test. Some borrowers with strong income and high debts find the conventional debt-to-income review a smoother fit. A loan officer can run both and show you.
The Costs Both Paths Share
Neither loan is free. The CFPB notes that a cash-out refinance replaces your mortgage with a larger one and often carries closing costs. Those costs are either built into the loan terms or paid at closing, so ask for the Loan Estimate and the Closing Disclosure and read the line items.
Each dollar you cash out is a dollar of equity gone. A conventional cash-out refinance usually limits how much of your home’s value you can borrow against, and the limit depends on the lender and the occupancy of the home. VA’s cash-out works differently, reaching 100% of the appraised value including the financed funding fee.
With two houses, both payments count. The payment on the refinanced home and the payment on the new one both feed into your qualifying. If you cannot carry both comfortably, neither loan solves that.
A HELOC or home equity loan is the other route to equity. It leaves your first mortgage in place, which can matter if your current loan is a good one. Those products have their own terms and are worth comparing.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your old one and gives you the difference in cash.
Entitlement: The amount of your loan VA agrees to guarantee. It shapes how much you can borrow without a down payment.
Certificate of eligibility (COE): The VA document that proves you qualify for the benefit.
Net tangible benefit: A required, real advantage to the borrower from a VA cash-out, such as a lower loan-to-value or higher monthly residual income.
Residual income: The money left each month after debts and living costs. It is VA’s controlling underwriting test.
Seasoning: The waiting period before you can refinance or cash out.
Funding fee: The one-time VA fee, waived for exempt borrowers and financeable into the loan.
A Balanced Verdict
Neither loan wins on every file. A VA cash-out usually offers more leverage and no mortgage insurance, and the wholesale programs we use for VA start at a 580 decision score, though conventional floors vary by program and lender. A conventional cash-out offers freedom from VA’s occupancy rules, no funding fee, and a way to preserve your entitlement.
Choose VA when the next house will be your home, you need the most equity, and your entitlement can support the purchase. Choose conventional when you lack eligibility, want to protect entitlement, or need flexibility on how the next property is used. When the answer is close, have a loan officer price both against the same house and the same goal.
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 proceeds to buy a vacation home or rental?
The cash is yours once the loan closes. But the VA refinance itself requires that you live in the home being refinanced, and a VA purchase loan is for a home you will occupy. A vacation home or rental purchased with other financing is a different loan with its own rules.
Does a VA cash-out use up my entitlement?
It can affect it. A VA cash-out of an existing VA loan interacts with your remaining entitlement, which matters if you plan a second VA purchase. Ask a loan officer to run the entitlement math before you close on the refinance.
Can I refinance a non-VA loan into a VA cash-out?
Yes. A VA cash-out can pay off a conventional, FHA, or USDA loan. You still need a certificate of eligibility, and you must live in the home.
Is there a cap of 90% on a VA cash-out?
Not as a program rule. The VA Handbook lists 90% only as one way to show a net tangible benefit. The wholesale programs we place files with can reach 100% of appraised value, including the financed fee. Some lenders set lower limits of their own.
What about the VA funding fee?
It is a one-time fee, financeable into the loan. On a cash-out it is 2.15% for first use and 3.3% for later use. Veterans who receive compensation for a service-connected disability, and other exempt groups, do not pay it.
For your own numbers, request a scenario review with Lendmire.
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.
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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. VA Lenders Handbook (VAP 26-7) Ch. 6, Refinancing Loans
3. VA.gov – Funding fee and closing costs
4. Fannie Mae Selling Guide B2-1.3-03
6. VA News – Use the benefit more than once
7. CFPB Ask – similar to HELOC
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 vs Conventional Cash-Out When the Cash Is Not Taxable Income · How Lenders Underwrite a VA Cash-Out Refinance Without Selling the House · VA Cash-Out vs Conventional Cash-Out on a Triplex for a Veteran
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.