VA Home Equity Loan: Your Options for Tapping Equity as a Veteran
Your VA home equity options compared
| VA cash-out refinance | Home equity loan or HELOC (non-VA) | |
|---|---|---|
| What it is | A new VA first mortgage that pays off your current loan and gives you cash | A second mortgage behind your current VA loan |
| Keeps your current rate? | No, you get a new rate on the whole balance | Yes, your first mortgage stays as is |
| Borrow up to | Commonly 90% of value with the lenders we work with | Usually 80% to 90% combined LTV, depending on lender |
| Funding fee | Yes, unless exempt | No |
| Rate type | Fixed or adjustable first-mortgage rate | Home equity loan: fixed. HELOC: usually variable, some fixed options |
| Closing costs | Full refinance costs | Often lower; varies by lender |
| Best when | Your current rate is similar to or higher than today's rates, or you need the largest amount | Your current VA rate is low and you want to keep it |
Terms vary by lender and are subject to approval. These comparisons are general, not an offer.
Why there's no "VA home equity loan"
The VA home loan program guarantees first mortgages used to buy, build, improve or refinance a home. It doesn't guarantee home equity loans or lines of credit, which are usually second liens. So when you see "VA HELOC" or "VA home equity loan," it almost always means one of two things: a VA cash-out refinance, or a regular home equity product used by a veteran who has a VA mortgage.
Option 1: VA cash-out refinance
A VA cash-out refinance replaces your current mortgage, whether VA, conventional or FHA, with a new VA-backed loan for more than you owe. You receive the difference in cash.
- How much: commonly up to 90% of your home's appraised value with the lenders we work with.
- Funding fee: 2.15% of the loan for first use and 3.3% for subsequent use, according to the VA, unless you're exempt (for example, if you receive VA disability compensation). It can be financed into the loan.
- Refinancing a non-VA loan: a VA cash-out is also how veterans move a conventional or FHA loan into the VA program, which can remove monthly mortgage insurance.
- Requirements: a Certificate of Eligibility, credit that meets the lender's minimum, income that passes the VA's debt-to-income and residual income review, and a VA appraisal. The home must be your primary residence.
Learn more on our VA cash-out refinance page or the VA's cash-out refinance overview.
Example: VA cash-out refinance
| Illustrative example | Amount |
|---|---|
| Home value | $400,000 |
| 90% of value | $360,000 |
| Current VA balance | $230,000 |
| Cash before costs and funding fee | $130,000 |
Hypothetical example for illustration only. Actual amounts depend on the appraisal, lender limits, closing costs and whether the funding fee applies.
Option 2: A home equity loan or HELOC with a VA mortgage
You can usually take out a home equity loan or HELOC from a private lender while keeping your VA first mortgage. The second loan isn't VA-backed, so VA rules like the funding fee and residual income test don't apply, but the second lender's own requirements do.
- Combined loan-to-value: most lenders cap your first mortgage plus the new second at 80% to 90% of your home's value. Because VA loans often start with little or no down payment, you may need to have built up equity first.
- Keeps your rate: if you locked a low rate on your VA loan, you keep it and only pay a new rate on the amount you borrow.
- Speed and cost: some HELOC programs close faster and cost less than a full refinance; select programs may not require an appraisal or income documents for qualified borrowers.
- Rate type: home equity loans are fixed; HELOCs are usually variable, with some fixed-rate HELOC options.
See our HELOC lenders guide and the HELOC vs home equity loan comparison. The CFPB also explains how HELOCs work.
What about a VA IRRRL?
The VA Interest Rate Reduction Refinance Loan (IRRRL), also called a VA streamline refinance, lowers the rate or changes the terms on an existing VA loan. It doesn't provide cash out, so it isn't a way to access equity. It's useful if rates have dropped and you simply want a lower payment. See the VA's IRRRL page.
How to choose: a simple rule of thumb
- Compare your current rate with today's rates. If your VA rate is well below current rates, a second mortgage (HELOC or home equity loan) usually keeps your overall cost lower.
- Compare the amount you need with your available equity. If you need more than a second lender will allow, a VA cash-out refinance at up to 90% may be the only way to get it.
- Consider the funding fee. If you're exempt because of a service-connected disability, a VA cash-out becomes more attractive.
- Think about payment style. Want one fixed payment? Cash-out refinance or home equity loan. Want to draw as needed? HELOC.
Example: keeping a low VA rate
Suppose you owe $230,000 on a VA loan at a low fixed rate and need $50,000. A cash-out refinance would put the entire $280,000 at today's rate. A $50,000 HELOC or home equity loan puts only the new $50,000 at a new rate, and your $230,000 keeps its low rate. When your existing rate is much lower than current rates, the second-mortgage route often costs less over time, even if the second loan's rate is higher. Our cash-out refinance vs HELOC guide walks through this math.
Common uses for home equity
- Paying off high-interest credit cards or personal loans. See debt consolidation with home equity
- Home improvements, repairs or accessibility modifications
- Education costs
- Emergency or medical expenses
- Removing mortgage insurance by refinancing a conventional or FHA loan into a VA loan
Risks to keep in mind
- Your home secures the debt. Missing payments on a cash-out refinance, home equity loan or HELOC puts your home at risk.
- Variable rates can rise. Most HELOC payments change with market rates.
- Less equity: borrowing close to your home's value leaves less cushion if prices fall or you need to sell.
- Closing costs and fees reduce the cash you actually receive.
How much equity do you have?
Before comparing options, estimate your equity. Take a realistic value for your home, based on recent sales of similar homes nearby, and subtract your current mortgage balance. Then see how much each option could unlock:
| Illustrative example | VA cash-out (90%) | HELOC (85% combined) |
|---|---|---|
| Home value | $350,000 | $350,000 |
| Maximum total borrowing | $315,000 | $297,500 |
| Current VA balance | $200,000 | $200,000 |
| Available before costs | $115,000 | $97,500 |
Hypothetical example for illustration only. HELOC combined loan-to-value limits vary by lender, commonly 80% to 90%.
The home equity calculator runs these numbers for your own home.
Steps to get a VA cash-out refinance
- Confirm eligibility: your lender pulls your Certificate of Eligibility.
- Check your numbers: estimated value, balance, credit and income.
- Compare VA lenders, since rates, fees and credit minimums vary.
- Order the VA appraisal, which sets the value used for the 90% limit.
- Underwriting and closing: after closing on a primary residence refinance, there's a three-business-day right of rescission before funds are released.
Steps to get a HELOC or home equity loan with a VA mortgage
- Check your combined loan-to-value: your VA balance plus the new line, divided by your home's value.
- Compare lenders on rate, draw period, fees and whether an appraisal or income documents are required.
- Apply and verify credit, income (unless a no-doc program applies) and property value.
- Close: your VA first mortgage stays exactly as it is; the new loan sits behind it.
Why compare lenders through a broker
VA cash-out refinances and HELOCs come from different kinds of lenders, and the best option for one veteran can be a poor fit for another. Working with a licensed loan officer who has access to a large network of lending partners means both routes can be priced side by side:
- VA lenders differ on rates, lender fees and credit minimums, even though the VA program rules are the same.
- HELOC lenders differ on combined loan-to-value limits, draw periods, fixed-rate options, and whether an appraisal or income documents are required.
- Funding fee exemptions for veterans with a service-connected disability change the math, and an experienced loan officer will account for them.
Approval, rates and terms are never guaranteed and depend on your credit, income, equity and the property.
Frequently asked questions
Does the VA offer a home equity loan?
No. The VA doesn't guarantee home equity loans or HELOCs. Veterans typically use a VA cash-out refinance or a non-VA home equity loan or HELOC.
Is there a VA HELOC?
No. You can get a HELOC from a private lender while keeping your VA mortgage, but the HELOC itself isn't VA-backed.
Can I get a HELOC if I have a VA loan?
Usually yes, if you have enough equity to stay within the second lender's combined loan-to-value limit.
How much equity can I take out with a VA cash-out refinance?
Commonly up to 90% of your home's appraised value with the lenders we work with, minus what you owe and costs.
Does a VA cash-out refinance have a funding fee?
Yes: 2.15% for first use and 3.3% for subsequent use, unless you're exempt, for example because you receive VA disability compensation.
Can I use a VA cash-out refinance on a conventional loan?
Yes. Eligible veterans can refinance a conventional or FHA loan into a VA cash-out loan, which can also remove monthly mortgage insurance.
Does a VA IRRRL let me take cash out?
No. The IRRRL lowers your rate or changes terms on an existing VA loan without cash out.
Which is cheaper, a VA cash-out or a HELOC?
It depends mainly on your current rate. If it's much lower than today's rates, a HELOC or home equity loan often costs less overall.
What credit score do I need?
The VA sets no minimum for a cash-out refinance; lenders do. HELOC and home equity lenders also set their own minimums.
Can I get cash out on a VA loan for a rental property?
VA cash-out refinances are for homes you live in. For rentals, see investment property cash-out options.
How long does a VA cash-out refinance take compared with a HELOC?
A VA cash-out refinance often takes around 30 to 45 days because it includes a VA appraisal and full underwriting. Some HELOC programs close faster, but timelines vary by lender and aren't guaranteed.
Can I pay off my HELOC later with a VA cash-out refinance?
Yes. A VA cash-out refinance can pay off both your first mortgage and a HELOC or home equity loan, as long as the total stays within the lender's loan-to-value limit.
Related guides and tools
Sources
- U.S. Department of Veterans Affairs: Cash-out refinance loan
- U.S. Department of Veterans Affairs: Interest Rate Reduction Refinance Loan
- U.S. Department of Veterans Affairs: VA funding fee and loan closing costs
- Consumer Financial Protection Bureau: What is a home equity line of credit?