The Quick Read: A VA cash-out refinance is the route out of an FHA or conventional loan and into a VA-backed one. VA’s streamline refinance does not work here, because it only replaces an existing VA loan. You do not have to take cash out, but the new loan still goes through full underwriting, an appraisal, and a test that the move actually helps you. Terms are subject to lender guidelines and full file review.
Why “Cash-Out” Is the Door Out of FHA
VA says a cash-out refinance replaces your current loan with a new one on different terms. It can pull cash from your equity. It can also refinance a non-VA loan into a VA-backed loan. That second use is the one this article is about.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium 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.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Here is the part that confuses people. VA’s streamline refinance, the IRRRL, is “VA to VA.” You can only use it if the loan on the property is already VA-guaranteed. An FHA or conventional borrower cannot use it. So the cash-out product is the only VA refinance that takes you out.
Two common myths are worth clearing up.
- “I need a VA loan already to use VA cash-out.” No. Replacing a non-VA loan is a listed use.
- “Cash-out means I must walk away with cash.” Not necessarily. Many veterans use the program only to convert the loan. Taking cash is a choice you make.
If you are comparing this with staying in FHA and tapping equity there, Lendmire’s page on the FHA cash-out refinance program lays out what that route reaches. Across the wholesale FHA programs Lendmire places files with, that product tops out at 80% of the home’s value. That is on a home you have owned and lived in for 12 months before the case number. Hold that number in mind, because the VA ceiling is higher.
The Requirements, Step by Step
VA sets three baseline conditions, and all three must be true:
1. You qualify for a Certificate of Eligibility (COE).
2. You meet VA’s and the lender’s standards for credit, income and other requirements.
3. You will live in the home you are refinancing.
Everything else in the process hangs off those three. Here is how it plays out in order.
Step 1: Get your Certificate of Eligibility
The COE is VA’s proof that you earned the benefit. Without it, nothing else moves. A lender can usually help you pull it, but check that your service category and discharge status are clear first.
Step 2: Occupancy
You must live in the home. That is a VA rule. It means a rental or investment property is out. A second home is out too. If the home you want to refinance is not your residence, this program does not apply.
Step 3: Full underwriting
Cash-out refinances get full credit underwriting. The lender looks at your credit history, your income, your other debts, and how much you would owe afterward. There is no streamlined shortcut for a non-VA payoff.
VA does not set a single minimum credit score. Lenders set their own, and some set a higher floor than others. That is why different lenders can look at the same veteran and give different answers.
Step 4: Appraisal and reasonable value
VA’s appraisal assigns a “reasonable value” to the home. That value is the denominator in the loan-to-value (LTV) math. It also sets the ceiling. VA’s own page says you may refinance up to 100 percent of the appraised value.
That sounds generous, and it is. But the 100% includes the funding fee if you finance it. In VA’s circular on refinance rules, the total loan amount, funding fee included, is divided by reasonable value. A low appraisal shrinks everything. It can cut your cash, and it can block the loan.
Many lenders also set a cap below 100%. The VA ceiling is a maximum, not a promise.
Step 5: The net tangible benefit test
Every VA cash-out loan must give you a net tangible benefit. In plain terms, the loan has to leave you better off in a way VA recognizes. The lender must also hand you a loan comparison and a home equity disclosure.
For a veteran leaving FHA, a common benefit is dropping the monthly mortgage insurance. For one leaving conventional, it might be a lower balance cost, a better structure, or a payoff of other debts. The lender confirms which test you meet.
Step 6: Type I or Type II
VA sorts cash-out loans into two types.
- Type I: the new loan, funding fee included, does not exceed the payoff of the loan you are replacing. This is a straight conversion with no cash out.
- Type II: the new loan is bigger than the payoff. The difference is your cash.
Some extra tests, such as a fee-recoupment check and a payment-reduction check, are written for VA-to-VA refinances. Seasoning rules are also tied to refinancing an existing VA loan. A veteran leaving FHA or conventional is generally not subject to them. The lender must still confirm which tests apply to your file.
What You Can and Cannot Roll Into the Loan
The VA funding fee is a one-time charge. It is not monthly mortgage insurance. VA’s schedule sets a lower tier for first use and a higher tier for repeat use. On a cash-out refinance, equity does not lower it. Down-payment reductions apply to purchases only.
Some veterans are exempt, including those who receive service-connected disability compensation and certain surviving spouses. Because the exemption list is detailed, check VA’s own funding-fee page for it and confirm your status with the lender.
You can generally finance the funding fee into the loan. Beyond that, other closing costs usually come out of your cash proceeds or from your own funds, with a narrow exception for certain energy-efficiency improvements. VA also warns that refinance closing costs can add up to thousands of dollars. Your Loan Estimate and Closing Disclosure will show each charge, so read them line by line.
If your equity is thin, this is where it bites. Every financed dollar of fee eats room under the 100% cap.
What Changes for Your Monthly Budget
The biggest swing for an FHA borrower is mortgage insurance. FHA loans carry an upfront premium and an annual premium. Across the wholesale FHA programs Lendmire works with, the upfront premium is 1.75% of the base loan and is typically financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV, it lasts the life of the loan. At or below 90%, it ends after eleven years.
HUD publishes the full premium structure by term, loan amount and LTV, and it has lowered the annual premium for most borrowers through a mortgagee letter. So check what you actually pay today, not what you remember from closing.
VA loans do not charge monthly mortgage insurance. VA lists “no private mortgage insurance required” among its program features. Replacing FHA can remove that line, but a financed funding fee raises your balance a little. The honest question is whether the removed premium outweighs the added balance over the time you will keep the loan.
A conventional borrower is in a different spot. If your monthly private mortgage insurance is already gone, or close to it, a switch has less to remove. That can make staying put the better call.
Two Examples, Without Dollar Figures
Example A: FHA to VA, no cash taken. Say a veteran bought with FHA at 96.5% financing and has built equity since. The home now appraises well above the payoff. She asks for a Type I loan: payoff plus the financed funding fee, nothing more. Her net tangible benefit is dropping the annual FHA premium. The loan stays far below 100% of reasonable value. The test is whether the premium saved beats the funding fee over the years she plans to stay.
Example B: Conventional to VA, with cash. A different veteran holds a conventional loan with solid equity. He wants to pay off higher-cost credit card debt. He asks for a Type II loan. The new balance covers the payoff, the financed fee, and the cash. The lender checks that total against reasonable value and the lender’s own cap. The CFPB warns that converting non-mortgage debt into home-secured debt can put the home at risk. It can still make sense when the cost of getting the cash is below the cost of the debts being paid off. If you take cash, ask what you will pay for it over the full term.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Where the General Rule Breaks
- Thin or negative equity. The 100% cap includes the funding fee. If the appraisal comes in low, a Type I conversion can fail on a home you owe nearly as much on as it is worth.
- Entitlement. Cash-out refinancing requires enough available VA entitlement. If you have used entitlement on another loan, the lender must sort that out.
- Repeat use. A veteran who has used the benefit before pays the higher funding-fee tier. Certain prior uses may be treated differently, so ask.
- Existing liens. VA refinances can pay off liens from any source, current or delinquent. The lender will need to review the details.
- Lender overlays. VA allows 100%, but a lender may cap lower or want a higher credit score.
- State limits. State law can add its own restrictions on cash-out loans.
Should You Switch or Stay?
Switch when most of these are true:
- You are paying monthly mortgage insurance that the new loan would remove.
- You plan to keep the home long enough to recover the funding fee.
- Your equity is comfortable, even after the fee is financed.
- You can pass full underwriting.
Stay put when these are true:
- Your current loan terms are already strong and the mortgage insurance is small or ending.
- You may sell soon, so the fee will not pay back.
- Equity is thin, and the appraisal could sink the loan.
- You are mainly after cash and have not weighed what it costs over the full term.
A cash-out refinance also replaces your original mortgage. It resets your terms and may lengthen your payoff. A home equity loan or HELOC leaves the first lien in place.
How the Requirements Differ by Goal
| Item | Converting, no cash | Taking cash |
|---|---|---|
| VA loan type | Type I | Type II |
| COE and occupancy | Required | Required |
| Full underwriting | Yes | Yes |
| Appraisal and 100% cap | Applies | Applies |
| Net tangible benefit | Required | Required |
| Funding fee | Applies | Applies |
Nothing on the list gets easier because you skip the cash. The appraisal and the credit review still apply. What changes is the size of the new loan.
Key Terms Defined
Certificate of Eligibility (COE): VA’s document showing you qualify for the home loan benefit.
Cash-out refinance: A new loan that replaces your current mortgage and can pay out equity or simply swap the loan type.
IRRRL: VA’s streamline refinance, which only replaces an existing VA loan.
Reasonable value: The value VA’s appraisal assigns to the home, used to cap the loan.
Net tangible benefit: A test showing the new loan leaves you better off in a way VA recognizes.
Funding fee: A one-time VA charge, not monthly mortgage insurance, that can be financed into the loan.
Entitlement: The amount of VA guaranty you have available to use.
Frequently Asked Questions
Can I use VA cash-out if my current loan is FHA?
Yes. VA lists refinancing a non-VA loan into a VA-backed loan as a use of the cash-out product. You still need a COE, full underwriting, an appraisal and a net tangible benefit.
Can the VA streamline refinance get me out of FHA?
No. The IRRRL is limited to loans that are already VA-guaranteed. An FHA or conventional borrower has to use the cash-out program, even if no cash is taken.
Does VA require a minimum credit score?
VA does not set one. Each lender adds its own standard, and some set a higher floor than others. Shopping the file through a broker can show you where those overlays differ.
Can I use this on a rental property?
No. VA requires you to live in the home you are refinancing, so investor use is not eligible.
Will the VA funding fee be lower if I have more equity?
No. On a cash-out refinance the fee depends on whether you have used the benefit before, not on your equity. Some veterans are exempt, so confirm your status.
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. Lendmire is a mortgage broker, so lenders decide on approval, and nothing here is a commitment to lend.
To review options for the home you live in, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA – Cash-out refinance loan
2. VA – Purchase and cash-out refinance
4. HUD – FHA mortgage insurance premium structure
5. HUD Mortgagee Letter 2023-05
6. CFPB – Cash-out refinances and paydown behavior of non-mortgage debt
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: FHA Cash-Out Refinance Requirements on a Paid-Off Home · Does an FHA Cash-Out Ever Beat VA for a Veteran in a Conventional Loan? · FHA Cash-Out Requirements for a Condo Building 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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.