Last updated: October 3, 2026
A VA-backed cash-out refinance loan replaces your current mortgage with a new, larger loan, allowing you to convert your home's equity into cash. It's a financial tool available to eligible Veterans, active-duty service members, and certain surviving spouses who want to borrow against the value they have built in their home. This new loan pays off your existing mortgage, and you receive the remaining funds at closing. Funds from a cash-out refinance can be used for any purpose, such as consolidating debt, paying for college tuition, or making significant home improvements, all while retaining the benefits of this loan like no monthly mortgage insurance.
Unlike some equity-tapping options, a cash-out refinance can be used to pay off any type of existing mortgage, whether it's a conventional, FHA, or even another VA loan.
How a VA cash-out refinance works
Think of a cash-out refinance as a two-part transaction. First, you are refinancing your existing mortgage into a new one. Second, you are borrowing additional money based on your home's equity and receiving it as a cash payment.
The process involves applying for a new VA-backed loan that is larger than what you currently owe. For example, if your home is valued at $400,000 and you owe $250,000 on your mortgage, you have $150,000 in home equity. A lender might allow you to borrow up to a certain percentage of your home's value. This percentage is called the loan-to-value, or LTV, ratio.
If a lender approves a new loan for $360,000 (90% LTV), that new mortgage would first pay off your existing $250,000 balance. The remaining amount, minus closing costs and the funding fee, is the cash you receive. In this scenario, you would have one new, larger mortgage of $360,000, not two separate home loans. (Source: VA funding fee and closing costs.)
Who is eligible for a VA cash-out refinance?
Eligibility for a VA-backed cash-out refinance mirrors the requirements for a VA purchase loan. You do not need to have an existing VA loan to qualify; you can refinance a conventional or FHA loan into this type of loan.
The core requirements include:
- Service History: You must meet the minimum service requirements set by the Department of Veterans Affairs. This generally includes 90 consecutive days of active service during wartime, 181 days during peacetime, or six years in the National Guard or Reserves. Your discharge must be other than dishonorable. You can find a detailed breakdown of VA home loan service requirements.
- Certificate of Eligibility (COE): This a document issued by the U.S. Department of Veterans Affairs proves to the lender that you meet the military service requirements. You can typically get your Certificate of Eligibility through a lender via WebLGY, online via the VA's website, or by mailing VA Form 26-1880.
- Credit and Income: The VA sets no minimum credit score. Individual lenders who originate these loans will set their own credit and income standards. Lenders will evaluate your debt-to-income (DTI) ratio and your residual income—the money you have left over each month after paying major expenses. Residual income is a key part of VA loan analysis.
- Occupancy: You must certify that you live in or intend to live in the home you are refinancing as your primary residence, generally within 60 days of closing. Investment properties and second homes are not eligible.
The costs of accessing your equity
Accessing your home equity through a refinance involves replacing your old loan with a new one, which comes with its own set of costs. It is important to understand these costs.
A significant cost is the one-time funding fee, which the VA charges to help sustain the loan program for future generations. For a cash-out refinance, the fee is 2.15% of the loan amount for first-time use and 3.30% for subsequent use, regardless of equity or loan-to-value. This fee can often be rolled into the new loan amount. (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.)
However, many Veterans are exempt from paying the funding fee. This includes veterans receiving or entitled to VA compensation for a service-connected disability, veterans rated eligible from a pre-discharge exam or review, active-duty Purple Heart recipients, and qualifying surviving spouses. Your Certificate of Eligibility (COE) will confirm whether you are exempt. A rating granted after closing may lead to a refund.
You will also have closing costs, similar to those on a purchase loan. These can include lender origination charges, which are capped at 1% of the loan amount by the VA. Other costs may include appraisal fees, title insurance, and other third-party charges, though a defined list of non-allowable fees cannot be charged to the veteran. You can explore a deeper list of potential VA refinance closing costs. (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.)
Get your VA Pre-Approval Summary.
Complete the short form and we send back a full VA breakdown: your entitlement, the VA funding fee, and an estimated $0-down monthly payment — with no mortgage insurance, ever.
- Your entitlement and county loan limit (if applicable)
- $0 down payment — no mortgage insurance, ever
- One-time VA funding fee, financeable into the loan
- Estimated monthly payment with taxes and insurance
Summary emailed and shown on screen · Not an approval or commitment to lend
Illustration only, generated from the information you enter. Not a Loan Estimate, pre-qualification, commitment to lend, or approval. Subject to appraisal, credit and income review, VA guidelines, and final lender approval. Not affiliated with, endorsed by, or sponsored by the U.S. Department of Veterans Affairs. Equal Housing Opportunity.
- Purchase price
- $385,000
- Down payment
- $0
- Base loan amount
- $385,000
- Financed funding fee (2.15%)
- $8,278
- Est. monthly payment
- $2,690
Sample figures · Simply Approved Mortgages · NMLS #2620881 · Equal Housing Opportunity
How much equity can you access?
Some lenders in our partner network offer a standard cash-out program capped at 90% LTV. While the VA does not set a maximum LTV/CLTV for cash-out refinances, some lenders in our network offer a high-LTV cash-out program with a maximum LTV/CLTV of 100% / 100%, including any financed funding fee. This program generally requires a minimum FICO of 620, or 660 if the loan amount exceeds conforming limits. These are lender overlays, not VA rules, and terms vary by lender, investor, and file. A home owned free and clear is not eligible for that high-LTV program. 90.01%–100% LTV is available at investors that follow VA Circular 26-19-05 without overlays. A home owned free and clear is not eligible. Texas 50(a)(6) is not allowed. These are lender overlays, not VA-wide requirements; the VA sets no minimum credit score. Availability and terms vary by lender, investor, and file and can change without notice; underwriting, appraisal, and final lender approval are required. (Source: VA funding fee and closing costs.)
Here’s a simplified calculation:
(Appraised Home Value x Lender’s Max LTV %) - Current Mortgage Balance = Gross Equity Available
From this amount, you must subtract the closing costs and the funding fee (if applicable). These costs can either be paid out-of-pocket or, more commonly, rolled into the new loan balance, which will reduce the final cash amount you receive at closing. You can use a VA funding fee calculator to get a clearer picture of this specific cost.
Cash-out vs. streamline refinance (IRRRL)
It's crucial to distinguish a cash-out refinance from a VA Interest Rate Reduction Refinance Loan (IRRRL), often called a "streamline." They serve very different purposes.
The main goal of an IRRRL is to lower your interest rate or monthly payment on an existing VA loan. It is not a cash-out loan — you cannot take equity out, aside from small closing adjustments VA allows. It also requires less documentation, and may not require an appraisal. The funding fee for an IRRRL is 0.50% for all borrowers who are not exempt. For a full comparison, it helps to understand the differences between a VA IRRRL and a cash-out refinance. (Source: VA funding fee and closing costs.)
A cash-out refinance, on the other hand, is designed specifically for accessing equity. It requires a full underwriting process, including income and credit verification, and a new VA appraisal to determine your home's current market value.
Understanding the risks and considerations
Using your home as a tool to access cash comes with significant responsibilities and risks that you should carefully consider. Your home secures the loan, which means if you fail to make your payments, the lender could foreclose. You are also creating a larger loan balance and restarting your loan term, which usually means paying more in total interest over the life of the loan. While these loans do not have a prepayment penalty, increasing the loan amount typically increases the overall interest paid if the loan is held to term.
Before moving forward, review the loan terms carefully. Evaluating loan options is a critical step, and resources are available to help you understand your choices. A cash-out refinance might increase your monthly payment, especially if you borrow a substantial amount or if current interest rates are higher than your original mortgage's rate and APR.
Common uses for your cash
While you can use the funds from a cash-out refinance for any reason, borrowers often use the money for financially productive goals.
Common uses include:
- Debt Consolidation: Paying off high-interest debt like credit cards or personal loans with a potentially lower-APR, single-payment mortgage.
- Home Improvements: Funding renovations that can potentially increase your home's value and livability.
- Education: Paying for college tuition or vocational training for yourself or a family member.
- Major Life Events: Covering expenses for a wedding, medical bills, or other significant personal needs.
VA cash-out refinance calculator: run your own numbers
Edit the fields to see how a new rate and cash-out amount change your payment. Uses the 2.15%/3.30% VA cash-out funding fee — there's no monthly mortgage insurance.
Estimates only. Nothing here is an application, pre-qualification, pre-approval, rate quote, rate lock or commitment to lend. You can keep using this tool without giving us anything.
Estimates only — not a loan offer, rate lock, or commitment to lend. Taxes, insurance, and rates vary by county and credit profile.
What to do next
If you believe a VA-backed cash-out refinance might be the right path for you, the next steps involve preparation and consultation.
First, clarify your financial goals. Why do you need the funds, and how much do you need? This will help you determine if this is the best tool for the job. Next, begin gathering your financial documents, including your Certificate of Eligibility, recent pay stubs, bank statements, and your current mortgage statement.
This loan isn't right for everyone. If you only need a small amount of money or are uncomfortable with extending your loan term, an alternative like a personal loan might be a better fit. The best way to understand your specific options is to speak with an experienced mortgage professional who can review your situation. To see what might be possible for you, you can start the pre-qualification process to explore your options with no obligation.
Related VA Home Loan Resources
- VA home loan calculator
- how a home loan works
- VA home loan guide
Sources
This government publication is cited for VA-backed loan program background and general consumer education. Simply Approved Mortgages LLC (NMLS #2620881) is a mortgage broker and is not HUD, FHA, or the CFPB, and is not affiliated with or endorsed by any government agency.
Frequently asked questions
- 01Is this guide a loan approval?
This guide is for informational purposes only. Eligibility, loan amount, and terms are determined by a lender after reviewing your Certificate of Eligibility, credit, income, residual income, and the property. It is not a loan approval, a final offer, or a rate quote.
- 02Who may qualify for a VA-backed loan?
Eligibility is based on service history and confirmed by a Certificate of Eligibility. The home must meet VA Minimum Property Requirements (MPRs) for safety, soundness, and sanitation, and generally must be occupied as a primary residence. Credit, income, and residual income review still apply.
- 03Do borrowers still have homeowner obligations?
Yes. You keep making the monthly mortgage payment and paying property taxes, homeowners insurance, and HOA dues when applicable, and you maintain the home. VA-backed purchase and cash-out loans generally require you to live in the home as your primary residence.
- 04How is the VA funding fee calculated for a cash-out refinance?
For a cash-out refinance, the funding fee is 2.15% of the loan amount for first-time use and 3.30% for subsequent use, for borrowers not exempt from the fee. This fee can be financed into the loan. (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.) (Source: VA funding fee and closing costs.)
- 05Can I refinance a non-VA loan with a VA cash-out refinance?
Yes, a cash-out refinance can be used to pay off any type of existing mortgage, including conventional, FHA, or another VA loan, and replace it with a new VA-backed loan.
