The Quick Read: The cash you receive is what is left of the new loan after the old liens are paid off and the funding fee and closing costs are taken out. The ceiling is 100% of the appraised value, and a financed funding fee counts against it. A higher fee tier, or a lower appraisal, shrinks the cash dollar for dollar. All figures are subject to lender guidelines and full file review.
Key Takeaways
- Cash out equals the new loan, minus every payoff, minus the funding fee if financed, minus closing costs not already financed.
- The VA cash-out reaches 100% of the appraised value, including the financed fee.
- The fee is 2.15% on first use and 3.3% after, and a refinance fee does not shrink with equity.
- The appraisal sets the ceiling, so it is the first number that moves your cash.
- Passing the net tangible benefit test is a minimum, not proof the loan is a good deal.
How Is the Cash Calculated, Step by Step?
The cash is the new loan amount less the payoffs, the financed fee and the unfinanced costs. VA describes the loan as one that refinances any type of lien and lets proceeds beyond the payoffs be taken as cash. Here is the order that decides the number.
1. Confirm eligibility and occupancy. The home must be one you own and occupy. You need a Certificate of Eligibility from VA. The COE decides eligibility, and service requirements are VA’s rules.
2. Get the appraisal. VA’s appraisal sets the reasonable value on the Notice of Value. Every other number is measured against it.
3. Build the ceiling. On the wholesale programs Lendmire places VA loans with, the cash-out reaches 100% of the appraised value, with the financed funding fee inside that total. The federal regulation sets the same 100% limit.
4. Subtract the payoffs. That means the first mortgage with interest accrued to the payoff date, plus any other lien being cleared.
5. Subtract the funding fee. If it is financed, it uses up ceiling room.
6. Subtract costs. Anything not rolled into the loan comes out of your proceeds or out of pocket.
7. Check the Closing Disclosure. Cash to Close should match your latest Loan Estimate. If it moved, ask why.
In words: cash out equals appraised value times the allowed percentage, minus payoffs, minus the financed fee, minus costs not already financed. If a lender sets its own cap below 100%, that lower cap replaces the 100% in the formula. Some lenders do.
What Does the Payoff Actually Include?
The payoff is more than the balance on your last statement. It is whatever it takes to clear every lien on the title, and it is the largest subtraction in the formula.
| Payoff item | What to know |
|---|---|
| First mortgage | Balance plus interest accrued to the payoff date |
| Second liens | HELOCs and junior loans must be cleared |
| Delinquent liens | VA allows them to be paid from proceeds |
| Tax or judgment liens | Can be paid from proceeds if on title |
The cash-out can pay off a conventional, FHA or USDA loan, not only a VA loan. That is why a homeowner with a non-VA mortgage can use it to move into VA financing. The payoff letter is the document to trust here, because the balance changes each day interest accrues.
How Does the Funding Fee Come Out of Your Cash?
The fee reduces your cash when it is financed into the loan. VA lists the cash-out fee at 2.15% for first use and 3.3% after first use. VA News confirms the same tiers. Veterans receiving compensation for a service-connected disability, and the other exempt groups, may be exempt from the fee. VA’s fee page lists who qualifies.
Two points trip people up.
First, the fee is a percentage of the whole new loan, not of the cash you take. A borrower taking little cash still pays it on the full balance.
Second, a refinance fee does not drop with more equity. The down-payment tiers that reduce fees on a purchase do not apply here. A veteran whose only earlier VA loan was on a manufactured home still pays the first-use rate.
Because the financed fee sits inside the 100% ceiling, any piece of it that would push the loan over the ceiling has to be paid in cash at closing. At the ceiling, a higher fee tier means less cash to you.
One House, Three Fee Situations
Run the same house three ways. Assume a value of 100 and a payoff of 70, and ignore other costs for the moment. These are modeled assumptions in percent of value, not market data.
| Situation | Fee on new loan | Loan ceiling | Cash after payoff and fee |
|---|---|---|---|
| Exempt | — | 100% | About 30% of value |
| First use | 2.15% | 100% | About 28% of value |
| Subsequent use | 3.3% | 100% | About 27% of value |
The fee is calculated on the loan, so the table rounds. The pattern is what matters. Same house, same payoff, and the fee tier alone moves the cash by a couple of points of value. Closing costs then come off whatever remains if they are not financed.
What Does a Low Appraisal Do?
A low appraisal shrinks the ceiling dollar for dollar, and the payoff does not shrink with it. Using the same modeled house, say the appraisal comes in 5% light.
| Scenario | Ceiling | Payoff | Cash before fee and costs |
|---|---|---|---|
| Appraisal as expected | 100% | 70% | 30% of expected value |
| Appraisal 5% light | 95% | 70% | 25% of expected value |
Five points off the value takes about one-sixth of the cash. The fee and costs then come out of a smaller pool. A homeowner planning around a specific cash need should treat the appraisal as the biggest unknown. If the number comes in light, ask the lender what a reconsideration of value would require, and expect it to need supporting sales.
How Do You Work Backward From the Cash You Need?
Add the target cash, the payoffs, the fee and any unfinanced costs. The total is the loan you need. Then test it against the ceiling.
Say you want cash equal to 20% of value, your payoff is 70%, and costs are modeled at 3%. The fee is a percentage of the new loan, so it makes the loan a little bigger than the simple sum. That puts the need at roughly 94% to 95% of value. It fits under the 100% ceiling, with a little room. Raise the payoff to 80% and the same target pushes the total near or above the ceiling. At that point the borrower either takes less cash or brings money to closing.
When Does a Cash-Out Return No Cash?
A cash-out returns no cash when the new loan only covers the payoff, the fee and costs. It is still the cash-out loan type for fee purposes. A borrower can use it to refinance a non-VA loan into a VA-backed loan with nothing back, and VA’s refinance fee tiers above apply.
A streamline (IRRRL) is different. It refinances an existing VA loan with no VA appraisal and a 0.5% fee unless exempt, and it cannot pay off other liens. Cash-out is the route when other liens need clearing or when cash is the goal.
What Can Change the Number Before Closing?
Several inputs move after you apply. Check these against the Loan Estimate and Closing Disclosure.
- The appraised value on the Notice of Value.
- The payoff figure, which changes with accrued interest.
- Second liens or judgments found in the title search.
- The funding fee tier, if your use history is not what you assumed.
- Whether any costs are financed or paid at closing.
- A lender’s own cap below 100%.
CFPB explains that Cash to Close and Closing Costs on the Closing Disclosure should match your most recent Loan Estimate. If they changed, ask why. One reason can be that costs were rolled into the loan.
What Gates the Cash?
A VA cash-out is fully underwritten. It is not a streamline.
- Seasoning. When replacing a VA loan, the wholesale programs apply the later of 210 days from the first payment and the sixth payment, as with the IRRRL.
- Net tangible benefit. The loan must serve your financial interest. The regulation lists criteria such as a shorter term, a lower payment, removing monthly mortgage insurance, moving an adjustable loan to fixed, or a new loan at or below 90% of reasonable value. The lender must give you a comparison at application and again at closing.
- Residual income. It is the controlling test. The 41% debt-to-income figure is a guideline, and a higher ratio needs residual income well above the table.
- Credit. VA sets no minimum score. The wholesale programs Lendmire works with start at a 580 decision score, and some lenders set higher floors.
Passing net tangible benefit is a legal minimum. It does not measure total cost.
What Does This Mean for Your Budget?
At 100%, no equity remains in the home. The new loan resets your balance, term and payment, and a financed fee adds to the balance. VA warns that closing costs can add up to thousands of dollars and tells borrowers to understand how the new loan relates to the home’s value.
CFPB has cautioned that cash-out refinances can turn unsecured debt, like credit cards, into debt secured by the home. That raises foreclosure risk if payments are missed. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
For the program overview, see Lendmire’s VA cash-out refinance program page. For a comparison on the conventional side, see Lendmire’s piece How Much Cash a Conventional Cash-Out Releases After Payoff and Costs.
Key Terms Defined
Net cash: The amount left for you after payoffs, the fee and costs come out of the new loan.
Payoff: The total needed to clear every lien on the home, including interest accrued to the payoff date.
Reasonable value: The appraised value VA sets on the Notice of Value, which the 100% ceiling is measured against.
Funding fee: A one-time VA charge, reviewable, that varies by use history and is waived for exempt veterans.
Seasoning: A required waiting period on the loan being replaced.
Net tangible benefit: A test that the new loan must meet at least one criterion showing it helps you financially.
Frequently Asked Questions
Can the funding fee be paid in cash instead of financed?
Yes. You can pay it at closing, which leaves the loan smaller and keeps the ceiling room open. Paying it in cash lowers your net cash from proceeds only if the money comes out of them. Any part of a financed fee that would push the loan above 100% must be paid in cash anyway.
Can I take less than the maximum cash?
Yes. The ceiling is a limit, not a target. A smaller loan means a smaller balance, and the fee is calculated on the loan, so it shrinks a bit too.
Does exempt status change the net?
Yes. An exempt veteran owes no funding fee, so the fee is not part of the loan calculation. VA’s fee page explains who qualifies.
Why would my lender cap below 100%?
Lender caps are lender policy, not VA rules. Some lenders set a lower cap, a higher credit floor or extra seasoning. Ask what the cap is before you plan around the VA ceiling.
Does the cash count as income?
Cash from a refinance is generally borrowed money, not earnings. Tax questions belong with a qualified tax professional.
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. Everything here is subject to lender guidelines and full file review. This is not a commitment to lend.
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
3. VA.gov – Funding fee and closing costs
4. VA News – Funding fee: who pays and who is exempt
5. CFPB – Closing Disclosure explainer
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: Does a Disability Rating Exempt You From the VA Cash-Out Fee? · Can a Veteran Do a VA Cash-Out Within the First Year? · 4 Myths About the Risk of a VA Cash-Out Refinance
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.