The Quick Read: The VA cash-out is the stronger fit when the veteran lives in the home. It reaches up to 100% of the appraised value, carries no mortgage insurance, and waives the funding fee for veterans receiving compensation for a service-connected disability. Conventional cash-out wins in narrower cases: a veteran who wants to keep entitlement untouched, or one with a property that falls outside VA’s owner-occupied rules.
The Honest Answer First
The VA cash-out is built for a veteran living in the home who wants the most equity access at the lowest friction. The conventional cash-out is built for a borrower with strong equity who is fine borrowing less and doesn’t need VA’s structure.
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.
A disability rating changes the VA side more than the conventional side. The funding fee is the main cost objection to a VA cash-out. For a veteran receiving compensation for a service-connected disability, that fee is waived. Appraisal, title and other closing costs still apply. The exemption removes one line, not all of them.
Lendmire places VA loans with wholesale programs that start at a 580 decision score. For a rated veteran who lives in the home, the VA side is the usual starting comparison. The file still has to be underwritten, and nothing here is a commitment to lend.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Leverage | Up to 100% of appraised value, fee included | Lower cap on a one-unit home; lower still on 2-4 units |
| Credit floor | 580 decision score on the wholesale programs | Generally higher |
| Mortgage insurance | None | Not usually needed, since leverage is capped at or below 80% |
| Funding fee | 2.15% first use, 3.3% after; waived if exempt | None |
| Occupancy | Veteran’s occupied home | Primary, second home or investment, with lower caps off primary |
| Income test | Residual income controls | Debt-to-income controls |
| Documentation | COE, plus VA award letter for disability income | Standard income file, plus award letter if disability income is used |
Two notes on the table. Conventional limits come from Fannie Mae’s guidance, which caps a one-unit primary residence at 80% on a cash-out and a two-to-four-unit primary residence at 75% (per the Fannie Mae eligibility matrix). Conventional cash-out also carries loan-level price adjustments tied to LTV and credit score, per the Fannie Mae Selling Guide. Those adjustments show up in pricing, not as a separate fee line.
Second, the 100% on the VA side is a ceiling. Lenders can set tighter caps, and every parameter stays subject to lender guidelines and full file review.
When VA Cash-Out Is the Better Fit
You live in the home and want the most equity. The VA cash-out reaches 100% of the appraised value, financed fee included. VA’s own lender guidance sets that 100% cap. The same guidance drops the cap to 90% if more than one discount point is rolled into the loan. A conventional cash-out on a one-unit primary home stops well short of that.
You are exempt from the funding fee. The fee is a one-time cost that can be financed. For a veteran receiving VA compensation for a service-connected disability, it is waived. That removes the biggest knock on the VA product. Confirm exemption status on the Certificate of Eligibility. VA.gov explains the funding fee and the refinance fee structure.
You want to avoid mortgage insurance. VA loans carry none, at any leverage. That matters if the current loan is a non-VA loan with mortgage insurance. Eliminating monthly mortgage insurance is one of VA’s listed net tangible benefit options.
Your disability income is part of the qualifying picture. VA treats disability compensation as a benefit and doesn’t ask for proof it will continue. It’s also non-taxable income, and VA’s underwriting allows an adjustment for that in the debt-to-income calculation. The gross-up helps the ratio only. It does not raise residual income. On VA loans, residual income is the controlling test, while the 41% debt-to-income figure is a guideline rather than a cap. A ratio above that guideline needs residual income well above VA’s table.
Your current loan isn’t VA. A VA cash-out can refinance any loan type into a VA loan. A conventional or FHA borrower with a rating can move into the VA structure and take cash in the same transaction. Lendmire’s VA cash-out refinance program page lays out how that works.
One practical point on the net tangible benefit. VA requires a cash-out to satisfy at least one of eight listed benefits. Examples include eliminating monthly mortgage insurance, shortening the term, lowering the principal-and-interest payment, or keeping LTV at or below 90%. The half-percent rate-reduction and fee-recoupment tests belong to the IRRRL streamline, not the cash-out. Files get tangled when someone applies the wrong test to the wrong product.
When Conventional Cash-Out Is the Better Fit
You want to leave VA entitlement alone. A conventional loan doesn’t touch your VA entitlement. If you plan another VA purchase and want full entitlement available, that is a real reason to look the other way.
You have a lot of equity and need a modest amount. If the cash you need is small relative to the home’s value, conventional’s lower leverage cap may not bind. In that case the funding fee for a non-exempt veteran, and the residual-income structure VA uses, matter less. A veteran who is exempt gives up less by choosing VA, but conventional becomes easier to justify as the amount needed shrinks.
The property doesn’t fit VA’s occupancy rule. VA cash-out is for the veteran’s occupied home. A second home or a rental can’t use it. Conventional cash-out can reach those properties, though with lower leverage caps than it allows on a primary residence.
Your credit or file profile sits better in a conventional box. The wholesale VA programs start at a 580 decision score. Some borrowers with strong credit and clean debt-to-income may find the conventional path perfectly workable. Others will find it narrower. The VA product’s residual-income test can be friendlier to a file with high debt-to-income, because the ratio is a guideline, not a hard cap.
You’d prefer no funding fee line at all and aren’t exempt. For a veteran not exempt, the VA fee is 2.15% on a first use and 3.3% after. It can be financed, but it adds to the balance. A conventional loan has no funding fee, though its pricing adjustments live elsewhere in the cost. A non-exempt veteran should compare both on the Loan Estimate, not on one headline number.
Where These Files Get Stuck
- The COE. It shows funding-fee status and generally lists VA disability income. If it’s missing or outdated, the exemption isn’t confirmed.
- The award letter. Disability income needs a current VA award letter. Conventional files usually need it too, so have it ready whichever path you choose.
- Pending ratings. A veteran with a rating still pending at closing may owe the fee at closing. If compensation is later awarded, a refund may be possible. Confirm the details on VA.gov.
- Income that doesn’t count. VA education allowances and similar temporary items aren’t treated as effective income. Aid and Attendance cases should be discussed with VA’s Pension Service.
- The appraisal. VA’s lender orders it, and VA’s “reasonable value” drives the 100% and 90% tests. A low value shrinks the cash-out fast.
Key Terms Defined
Certificate of Eligibility (COE): The VA document that confirms your eligibility and shows funding-fee status.
Funding fee: A one-time VA charge, financeable, that is waived for veterans receiving compensation for a service-connected disability.
Residual income: What’s left of monthly income after debts and living costs. VA treats it as the controlling test.
Net tangible benefit: A requirement that a VA cash-out give the borrower at least one of VA’s listed financial advantages.
Entitlement: The amount of VA backing available to you. A VA loan uses some of it.
Loan-level price adjustment (LLPA): A pricing add-on in conventional cash-out loans based on LTV and credit score.
The Tradeoffs Both Sides Share
Cash-out replaces the first mortgage with a larger one. That can raise the payment and lengthen the payoff time, as the CFPB’s home equity guide notes. Pulling more equity also leaves less cushion if values fall. Borrowing up to 100% means a price drop could leave you owing more than the home is worth.
On a refinance of a primary home, you get three business days to cancel after closing, and Saturdays count. The CFPB explains the right of rescission. If you cancel, you still owe the original loan.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
The Balanced Verdict
For a disabled veteran living in the home, VA cash-out usually deserves the first look. The leverage is higher, there is no mortgage insurance, the income test reads disability compensation favorably, and an exempt veteran pays no funding fee. Conventional earns its place when entitlement preservation matters, when the property isn’t owner-occupied, or when the cash needed is small and the file is clean.
Run both on a Loan Estimate. Compare the equity each reaches, the closing costs, and what stays available for later.
Frequently Asked Questions
Does a disability rating waive the funding fee on a VA cash-out?
Yes, for veterans receiving VA compensation for a service-connected disability, and for the other exempt groups, the funding fee is waived. The COE should show the status. Other closing costs such as the appraisal and title still apply. Verify the exemption wording on VA.gov.
Can I borrow 100% of my home’s value?
The VA ceiling is 100% of the appraised value, financed fee included, but it is a ceiling, not a promise. Lenders can set tighter caps, and more than one discount point rolled into the loan drops VA’s cap to 90%.
Does VA count disability income as qualifying income?
Yes. VA treats disability compensation as a benefit and doesn’t require proof of continuance. Its non-taxable status allows an adjustment in the debt-to-income calculation. That adjustment doesn’t apply to residual income, which remains the controlling test.
Can I convert a conventional loan into a VA loan and take cash out?
Yes. The loan must satisfy VA’s net tangible benefit requirement, and seasoning rules apply when the loan being refinanced is itself a VA loan.
Does a VA cash-out use up my entitlement?
A VA loan uses some entitlement, while a conventional loan does not. Whether it matters depends on whether you plan another VA purchase. A veteran with remaining rather than full entitlement may face different limits, so speak with a loan officer.
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.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. Fannie Mae eligibility matrix
2. Fannie Mae Selling Guide B2-1.3-03
4. VA.gov — Funding fee and closing costs
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 After a Job Change · How to Qualify and Apply for a VA Cash-Out Refinance as a Veteran · VA Cash-Out vs Conventional Cash-Out for a Condo in Litigation
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.