The Quick Read: A veteran in this spot who takes a VA cash-out refinance pays the subsequent-use funding fee of 3.3%, unless an exemption applies. First-time users pay 2.15% on the same loan. The fee is a percentage of the whole new loan, not just the cash you take out. You can usually finance it, but the financed fee counts against the 100% value ceiling. Everything here is subject to lender guidelines and full file review.
What You Need to Know First
The VA funding fee is a one-time charge on a VA-backed loan. It exists because VA loans carry no monthly mortgage insurance. VA.gov says the fee applies to refinances too, unless you meet an exemption.
Here are the points that matter most:
- Your tier is set by use, not by equity. Having a VA loan already puts you in the “subsequent use” column.
- Cash-out fees are 2.15% for first use and 3.3% after. Those are the figures across the wholesale programs Lendmire places VA loans with.
- Bigger equity does not lower it. The reduced 1.25% and 1.5% tiers are for purchases with a down payment. They don’t apply to a cash-out.
- Exempt veterans pay nothing. That includes those receiving VA compensation for a service-connected disability.
- The fee can ride in the loan. That raises your balance and trims the cash you walk away with.
The mechanics of the VA cash-out refinance program are simple once you see the pieces. The rest of this page lays them out in order.
How the Cash-Out Fee Tier Gets Decided
Your tier comes down to two questions. Have you used the VA benefit before? And do you qualify for an exemption? Everything else, including your credit score and the size of your equity, doesn’t move the percentage.
The table shows the fee for a cash-out by borrower situation.
| Your situation | Cash-out fee |
|---|---|
| Never used a VA loan | 2.15% |
| Existing or earlier VA loan | 3.3% |
| Exempt (for example, receiving disability compensation) | Waived |
VA Circular 26-23-06 Exhibit B lists the 2.15% and 3.3% cash-out figures. It also states that reduced fee rates do not apply to refinance loans. So you can’t shrink the cash-out fee by bringing money to closing. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
One more point on timing. The schedule carries a stated end date, and the tiers change for loans closing after it. Your loan officer confirms the schedule in force at your closing.
What “Subsequent Use” Really Covers
Subsequent use means you have used your VA home loan benefit before. The VA’s own fee page ties the charge to whether it is your first time or a later time using a VA-backed loan.
Does a paid-off loan reset you to first use? Generally, no. Prior use is usually counted even after the earlier loan is paid off or the home is sold. That point is common lender-side practice, and the VA page doesn’t spell it out in one line. Your Certificate of Eligibility (COE) is the document that settles it. VA issues the COE and decides your eligibility. Lenders don’t.
Restoring entitlement is a separate question. Restored entitlement lets you use the benefit again for a new loan. It doesn’t wipe the fee history. Treat the two as different ledgers.
The Fee, Step by Step
Here is the sequence on a cash-out for a veteran who already holds a VA loan.
1. Check the exemption first. If you are exempt, the rest of the fee math disappears. Your COE and VA documentation confirms it.
2. Find the tier. Existing VA loan means 3.3%.
3. Apply it to the new total loan. The VA says the fee applies to the loan amount, not a purchase price. A cash-out has no purchase price, so the base is the whole new loan. Not the cash portion. The whole loan.
4. Decide how to pay. You can pay in cash at closing or finance it. Under 38 U.S.C. § 3729, the fee may be included in the loan and paid from its proceeds.
5. Check the ceiling. A VA cash-out reaches up to 100% of the appraised value, including the financed fee. The fee sits inside that ceiling, not on top of it.
6. Expect a full appraisal. Unlike the streamlined IRRRL, a cash-out is valued by a VA appraiser.
Across the wholesale programs Lendmire works with, underwriting on a cash-out leans on residual income. That is the money left each month after your debts and living costs. The 41% debt-to-income figure is a guideline rather than a hard cap. A higher ratio needs residual income well above the VA table. The lender also checks for a net tangible benefit, meaning the refinance has to help you in a real, measurable way. Seasoning applies too: the later of 210 days from your first payment and your sixth payment on the loan being refinanced.
On sizing, VA draws a line between loans that stay at or below the payoff amount and loans that pull cash. The extra tests attach to the loan type. The fee percentage doesn’t change with it. For you, the tier is 3.3% either way.
A Worked Example in Percentages
Take two veterans refinancing at 100% of the appraised value. No dollar amounts needed.
Veteran one has used the benefit and isn’t exempt. The fee is 3.3% of the new loan. Financed, it lands inside the 100% ceiling. So the cash that reaches the veteran’s account shrinks by roughly that fee’s size. Interest then accrues on the larger balance for the life of the loan.
Veteran two is rated for service-connected compensation and is exempt. Same loan, same ceiling, fee of zero. The full equity room goes to cash and payoff.
The difference is the entire 3.3%. That is about half again as large as the first-use fee, since 3.3% runs roughly 1.5 times 2.15%. That ratio is plain arithmetic on the two figures, not a VA statement.
Notice what this does not say. It doesn’t say the fee explains your whole monthly payment change. A cash-out resets the balance, the rate, and the term at the same moment. The fee is one ingredient. Your loan officer breaks out the rest on your Loan Estimate.
Cash-Out or IRRRL? Choosing With a VA Loan in Place
If your goal is cash, the IRRRL can’t deliver it. It lowers the rate or moves you from adjustable to fixed. It doesn’t pay you out. Here is the side-by-side.
| Factor | IRRRL | Cash-out |
|---|---|---|
| Main purpose | Lower rate or fix the term | Pull equity or change loan type |
| Cash to you | No | Yes |
| Appraisal | No VA appraisal | Full appraisal |
| Funding fee | 0.5% unless exempt | 3.3% after first use |
| Reach | Existing VA loan only | Up to 100% of value |
Both carry seasoning and a net tangible benefit test. The IRRRL fee is stated at 0.5% in the Exhibit B schedule, and the statute table shows the same 0.50. A cash-out is also the product that refinances any loan type into VA, so a veteran with a conventional loan can use it as well.
A quick if/then:
- You want a lower rate and no cash. The IRRRL is the cleaner fit.
- You need cash for a major expense or to consolidate debt. The cash-out is the only VA refinance that does it.
- You want cash but the 3.3% bites. Weigh whether you really need the full amount. Borrowing less shrinks the fee, since it is a percentage of the total.
The misconception worth killing: “all VA refinances cost 0.5%.” Only the IRRRL does.
Who Pays Nothing
VA says you won’t pay the fee if you receive VA compensation for a service-connected disability. Other exempt groups exist, including certain surviving spouses and some active-duty members with a qualifying rating or a Purple Heart. Check VA’s exemption list for the exact categories, because eligibility turns on VA documentation.
Two points help in practice. First, an exempt veteran pays nothing at either tier. The 3.3% versus 2.15% question only matters to people who owe the fee. Second, get the exemption confirmed on your COE before the Closing Disclosure is issued. A mistake there lands on the closing statement.
What if the rating arrives after closing? A refund route may exist. The VA page and your loan servicer are the places to ask.
Where the Rule Bends
The general rule is clean, but a few spots need care.
The schedule has an end date. Tiers apply to loans closing inside the current window. After it, the statute shifts the schedule. If you are weighing a long delay, ask what applies on your closing date.
Other loan types use other numbers. The statute table lists a 1.00 fee for certain manufactured home loans, and the VA exhibit shows a separate figure for Native American Direct Loans. Those are different products from a standard cash-out. How a prior manufactured-home loan counts toward your tier is a question for your loan officer and your COE.
Occupancy. A VA cash-out is for a home you live in, and the fee percentage doesn’t shift with occupancy.
Other closing costs. The VA notes that the lender also charges interest on the loan on top of closing fees, and that you should ask about any loan costs added to the loan amount. Appraisal, title, and other costs sit outside the funding fee. Your Loan Estimate lists them.
Entitlement. Cash-out on a home that carries your VA loan touches the entitlement tied to that home. If a later VA purchase is on your mind, speak with a loan officer before you refinance. Lendmire’s article How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs helps you size that tradeoff.
Common Mistakes
- Assuming a paid-off loan clears your history. Prior use usually still counts.
- Thinking more equity cuts the fee. It doesn’t on a refinance.
- Applying the fee to the cash portion only. The base is the whole new loan.
- Treating the fee as cash due at closing. It can be financed, which then affects the ceiling.
- Blaming the fee for the entire payment change. The balance, rate, and term all move.
- Skipping the COE check. An exemption you qualify for but don’t document costs real money.
On tax, a note: tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Funding fee: a one-time charge on a VA-backed loan that replaces monthly mortgage insurance.
Subsequent use: using your VA home loan benefit after you have used it before.
Certificate of Eligibility (COE): the VA document showing your eligibility, your entitlement, and any fee exemption.
IRRRL: the Interest Rate Reduction Refinance Loan, a VA-to-VA refinance that lowers the rate or fixes an adjustable loan, without cash out.
Seasoning: the waiting period after your first payment before you can refinance.
Net tangible benefit: a real, measurable gain from the refinance that the lender must be able to point to.
Residual income: the monthly money left after debts and living costs, which is the controlling VA underwriting test.
Weighing It Against the Loan You Have
The fee is a real cost, but it is one piece of the decision. 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 and arranges these loans through wholesale lenders, so approval and terms rest with the lender after full file review.
Frequently Asked Questions
Does an existing VA loan disqualify me from a cash-out?
No. The benefit is reusable, and a current VA loan doesn’t bar a new one. What changes is the fee tier. You move to the subsequent-use column, so the cash-out fee is 3.3% unless you are exempt. Your COE shows your entitlement, and the lender reviews the full file.
Do I pay the higher fee if I paid off my first VA loan?
Usually, yes. Prior use generally still counts after a payoff or a sale, so you are treated as a subsequent user. Restoring entitlement helps you borrow again but is a separate matter from the fee tier. Confirm your situation with your COE and loan officer.
Can I roll the funding fee into the loan?
Yes. The fee may be included in the loan and paid from its proceeds. The tradeoff is a larger balance with interest charged on it. The financed fee also sits inside the 100% value ceiling, so it trims the cash you receive.
Is the fee charged only on the cash I take out?
No. It is charged on the whole new loan amount. On a cash-out there is no purchase price, so the entire loan balance is the base. That is why borrowing a smaller total lowers the fee.
What if I get a disability rating after closing?
You may be able to claim a refund of the fee. Details depend on your rating and VA’s process. Ask your servicer and check VA’s funding fee page for current instructions.
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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References
1. VA.gov: VA funding fee and closing costs
2. VA Circular 26-23-06 Exhibit B
3. 38 U.S.C. § 3729 (Cornell Legal Information Institute)
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: How Much a VA Cash-Out Funding Fee Adds to Your Monthly Payment · Can a Veteran Get a VA Cash-Out While a Divorce Is Pending? · VA Cash-Out Funding Fee Rules for First or Subsequent Use
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.