VA Cash-Out Refinance: Requirements, Limits and How It Works
What is a VA cash-out refinance?
A VA cash-out refinance is a VA-backed mortgage that pays off your existing home loan and lets you take some of your equity as cash. Your existing loan doesn't have to be a VA loan. It can be conventional, FHA or another type. The new loan is guaranteed by the U.S. Department of Veterans Affairs, which is why VA cash-out refinances can allow a higher loan-to-value than most conventional cash-out loans. See the VA's official cash-out refinance loan page.
Veterans commonly use a VA cash-out refinance to:
- Pay off high-interest credit cards, auto loans or personal loans
- Fund home improvements or repairs
- Pay for education
- Refinance a non-VA loan into a VA loan to drop mortgage insurance
- Build an emergency reserve
VA cash-out refinance requirements
| Requirement | What it means |
|---|---|
| VA eligibility | A valid Certificate of Eligibility (COE). See how to request a COE; your lender can often request it for you. |
| Occupancy | You must live in the home as your primary residence. |
| Loan-to-value | Up to 90% of the home's appraised value with the lenders we work with. |
| Credit | The VA doesn't set a minimum score, but lenders do. Our site focuses on homeowners with 600+ credit. |
| Income and DTI | Stable income and a manageable debt-to-income ratio, plus VA residual income guidelines. |
| Appraisal | A VA appraisal is required to confirm the home's value. |
| Seasoning | If you're refinancing an existing VA loan, it generally must be at least 210 days past the first payment due date and you must have made at least six monthly payments. |
| Net tangible benefit | The lender must show the refinance benefits you, and give you required disclosures comparing the old and new loans. |
How much cash can you get with a VA cash-out refinance?
The basic formula: home value × 90% − current mortgage balance − closing costs and funding fee (if financed).
Hypothetical example for illustration only. Rates and costs are not quotes.
| Appraised home value | $400,000 |
| Maximum loan at 90% LTV | $360,000 |
| Current mortgage balance | $220,000 |
| Estimated closing costs (example 2%) | about $7,200 |
| Funding fee (first use, 2.15%, if not exempt) | about $7,740 |
| Estimated cash out | about $125,000 |
If you're exempt from the funding fee, the cash out in this example would be about $7,700 higher. Try your own numbers in our cash-out refinance calculator; choose the VA option to use 90% LTV.
VA funding fee for cash-out refinances
The VA funding fee is a one-time charge that helps keep the VA home loan program running. For cash-out refinances, the VA lists these rates:
| Use of VA loan benefit | Funding fee |
|---|---|
| First use | 2.15% of the loan amount |
| After first use | 3.3% of the loan amount |
You won't pay the funding fee if, among other situations, you receive VA compensation for a service-connected disability, you're eligible for that compensation but receive retirement or active-duty pay instead, or you're a surviving spouse receiving Dependency and Indemnity Compensation. The fee can be paid at closing or rolled into the loan. See the VA's funding fee and closing costs page for the full list.
VA cash-out refinance vs VA IRRRL
| VA cash-out refinance | VA IRRRL (streamline) | |
|---|---|---|
| Purpose | Take cash out, or refinance a non-VA loan into VA | Lower the rate on an existing VA loan |
| Current loan | Any loan type | Must already be a VA loan |
| Cash to you | Yes | No |
| Appraisal | Required | Usually not required |
| Funding fee | 2.15% / 3.3% | Lower (see VA) |
If you only want a lower rate on an existing VA loan, the VA IRRRL is usually simpler and cheaper.
VA cash-out refinance vs conventional cash-out vs HELOC
| VA cash-out | Conventional cash-out | HELOC | |
|---|---|---|---|
| Max LTV | Up to 90% (lenders we work with) | Generally 80% | Lender's combined LTV limit |
| Mortgage insurance | None (funding fee instead) | None at 80% or below | None |
| Keeps current mortgage? | No | No | Yes |
| Best when | You need more cash or want to leave FHA/conventional | You're not VA-eligible | Your current rate is low |
If your current mortgage rate is much lower than today's rates, a HELOC may cost less because it leaves that rate alone. See cash-out refinance vs HELOC for a full example, and HELOC requirements to see if you qualify.
Pros and cons of a VA cash-out refinance
| Pros | Cons |
|---|---|
| Borrow up to 90% of your home's value | Replaces your current rate on the whole balance |
| No monthly mortgage insurance | Funding fee unless exempt |
| Can refinance FHA or conventional loans into VA | Appraisal and full underwriting required |
| Flexible credit guidelines at many lenders | Resets your loan term |
| One loan, one payment | Uses your home as collateral for the cash |
How to get a VA cash-out refinance: step by step
- Confirm eligibility and get your Certificate of Eligibility.
- Estimate your cash with the cash-out refinance calculator and a conservative home value.
- Check your credit free at AnnualCreditReport.com.
- Compare lenders on rate, fees and cash to you, using each Loan Estimate.
- Apply and submit documents: pay stubs or retirement income, bank statements, your mortgage statement and, if applicable, your VA disability award letter for the funding fee exemption.
- VA appraisal confirms value and that the home meets VA minimum property requirements.
- Close and receive funds after the three-business-day right-to-cancel period.
Who is eligible for a VA cash-out refinance?
Eligibility is based on your service. In general, the VA home loan benefit is available to:
- Veterans who meet minimum active-duty service requirements
- Active-duty service members
- National Guard and Reserve members who meet service requirements
- Certain surviving spouses of veterans who died in service or from a service-connected disability
Your Certificate of Eligibility confirms your entitlement. If you've used your VA benefit before, you may still have remaining entitlement, and your lender can review it with you. Most lenders can request your Certificate of Eligibility online in minutes, so you don't need to have it in hand before you start comparing options.
Documents to have ready
- Certificate of Eligibility (or your DD214 so your lender can request it)
- Recent pay stubs and W-2s, or retirement, Social Security and pension statements
- VA disability award letter, if you're claiming the funding fee exemption
- Recent bank statements
- Your current mortgage statement and homeowners insurance declarations page
- Government-issued photo ID
If you're self-employed, add two years of tax returns and a year-to-date profit and loss statement.
Common mistakes to avoid
- Replacing a very low rate for a small amount of cash. If you only need a modest sum, a HELOC or home equity loan may cost less over time.
- Forgetting the funding fee. If you're not exempt, the fee reduces your cash or increases your loan.
- Not claiming your exemption. If you receive disability compensation, make sure your lender has your award letter so the fee is waived.
- Overestimating home value. The VA appraisal sets the number, so plan conservatively.
- Ignoring the loan term. A new 30-year loan can add years of payments; consider a shorter term or extra principal payments.
- Responding to unsolicited "cash-out" offers without comparing. The VA warns veterans to be cautious of aggressive refinance marketing. Compare offers and read every disclosure.
Using a VA cash-out refinance to consolidate debt
Many veterans use a VA cash-out refinance to pay off higher-interest debt with a single, lower payment. It can work well, but it moves unsecured debt onto your home and stretches it over a longer term. Read our guide to a home equity loan for debt consolidation for the trade-offs, and have a plan to keep the paid-off accounts at zero.
Taxes
Cash-out proceeds are borrowed money, not income, so they generally aren't taxed. Interest on the cash-out portion is generally deductible only if you itemize and use the funds to buy, build or substantially improve the home. See IRS Publication 936.
Frequently asked questions
What is the maximum LTV for a VA cash-out refinance?
With the lenders we work with, you can borrow up to 90% of your home's appraised value on a VA cash-out refinance, subject to credit, income and other guidelines.
Can I do a VA cash-out refinance if my current loan isn't a VA loan?
Yes. A VA cash-out refinance can pay off a conventional, FHA or other loan and replace it with a VA-backed loan, as long as you're eligible and meet the requirements.
How much is the VA funding fee on a cash-out refinance?
According to the VA, it's 2.15% of the loan amount for first use and 3.3% after first use. Veterans receiving VA disability compensation, and some others, are exempt.
What credit score do I need for a VA cash-out refinance?
The VA doesn't set a minimum credit score; lenders do. Many lenders work with scores in the 600s, and our site focuses on homeowners with 600+ credit.
How long do I have to wait to do a VA cash-out refinance?
If you're refinancing a VA loan, it generally must be at least 210 days past the first payment due date and you must have made at least six monthly payments. Lenders may have additional requirements.
Do I need an appraisal for a VA cash-out refinance?
Yes. A VA appraisal is required to confirm the home's value and condition.
Can I use a VA cash-out refinance on a rental property?
No. You must occupy the home as your primary residence.
Is a VA cash-out refinance better than a HELOC?
It depends on your current rate and how much you need. A VA cash-out refinance can provide more cash and one payment, while a HELOC keeps a low first-mortgage rate in place.
How long does a VA cash-out refinance take?
Many close in about 30 to 45 days, depending on the appraisal, your documents and the lender's workload. You receive the cash a few business days after closing, once the right-to-cancel period ends.
Can I refinance an FHA loan into a VA loan with cash out?
Yes. If you're VA-eligible, a VA cash-out refinance can pay off your FHA loan, which can remove FHA mortgage insurance, and you can take cash out at the same time if you have enough equity.
Can I include the funding fee in my loan?
Yes. You can pay the VA funding fee at closing or finance it into the loan amount, subject to the loan limits for your situation.
Does a VA cash-out refinance have mortgage insurance?
No. VA loans don't charge monthly mortgage insurance. Instead there's a one-time funding fee unless you're exempt.
Related guides and tools
Sources
- U.S. Department of Veterans Affairs: Cash-out refinance loan
- U.S. Department of Veterans Affairs: VA funding fee and loan closing costs
- U.S. Department of Veterans Affairs: How to request a VA home loan Certificate of Eligibility
- U.S. Department of Veterans Affairs: Interest Rate Reduction Refinance Loan
- Internal Revenue Service: Publication 936, Home Mortgage Interest Deduction