VA Cash-Out Refinance Loan: Tap Your Home Equity
If you are eligible for a VA loan, you can refinance into a VA cash-out loan and borrow up to 100% of your home’s appraised value, subject to underwriting and VA requirements. That works whether you want cash from your equity or just want to move out of a conventional, FHA, or USDA loan and into a VA loan. The total loan, including the VA funding fee, can reach 100% of the VA appraised value. To qualify, you need a VA Certificate of Eligibility, a full appraisal, income and credit that pass underwriting, and a plan to live in the home. The VA funding fee is 2.15% for first use and 3.3% for later use.
This is different from the VA streamline refinance (IRRRL). The streamline is for people who already have a VA loan and want a lower rate with less paperwork. The cash-out refinance has more steps, but it opens more doors. Here is how it works in 2026.
What Is a VA Cash-Out Refinance Home Loan? Refinance Options, Mortgage Insurance, and More
Think of your home as a savings account you have been filling with every mortgage payment. Your equity is the part you own: your home’s value minus what you still owe. A cash-out refinance lets you borrow against that equity while also changing your loan. The VA calls any refinance that is not a streamline a “non-streamline” or “cash-out” refinance, even when you do not take any cash.
There are two kinds:
- Type I (no cash out): The new loan is no bigger than the balance you are paying off. You use it to change your rate, your term, or your loan type. For example, you might refinance an FHA loan into a VA loan to drop your monthly mortgage insurance.
- Type II (cash out): The new loan is larger than the balance you are paying off, and you receive the difference as cash. The VA does not require you to explain how you will spend the money.
If you already have a VA loan and only want a lower rate, the VA streamline refinance is usually simpler and cheaper.
Why Veterans Choose a VA Cash-Out Refinance
Veterans choose this loan to switch into a VA loan and drop monthly mortgage insurance, to borrow against their equity, and to reach a higher loan-to-value than many other refinances allow. Here are the main benefits:
- Switching to a VA loan. You can refinance a conventional, FHA, or USDA loan into a VA loan. That can remove monthly mortgage insurance. See our guides to FHA mortgage insurance and private mortgage insurance.
- Borrowing against equity. You can take cash to pay for repairs, pay off high-interest debt, or cover other needs.
- Higher loan-to-value. The new loan, including the funding fee, can go up to 100% of your home’s VA value. Many other cash-out loans stop well below that.
- Changing your loan. You can move from an adjustable rate to a fixed rate, or change your term.
You can also pay off a second mortgage or a home equity line with the refinance, as long as the new VA loan ends up in first-lien position.
Who Qualifies for a VA Cash-Out Refinance
To qualify, you need VA eligibility, ownership of the home, a plan to live in it, income and credit that pass full underwriting, a VA appraisal, and a clear benefit from the refinance. Because the loan involves a full review, the requirements look more like a purchase loan:
- VA eligibility. You need a Certificate of Eligibility showing you have earned the benefit. Our guide to VA loan guidelines explains who qualifies.
- You own the home. You must own the property at or before closing, and the new VA loan has to be a first mortgage.
- You plan to live there. You certify that you intend to live in the home as your primary residence. A rental property or second home does not qualify.
- Income and credit. The lender verifies your income, checks your credit, and does full underwriting. The VA has no minimum credit score, but lenders can set their own. See mortgage overlays.
- Residual income and DTI. VA underwriting puts residual income first, which is the money left over each month after debts and living costs. The guideline for debt-to-income is 41%, though a lender can go higher with strong residual income.
- A full appraisal. Unlike a streamline, a VA appraisal is always required.
- A net tangible benefit. The refinance must help you in at least one clear way. For example, it may give you a lower rate or lower payment, shorten your term, remove mortgage insurance, move you from an adjustable rate to a fixed rate, or leave you with a loan that is 90% or less of your home’s value.
- Time in your current mortgage. If you are refinancing an existing VA mortgage, you generally need to wait 210 days from your first payment and have made at least six payments. Other loan types have lender rules of their own.
Bankruptcy or foreclosure in your past does not always end the conversation. Read our guide to getting a VA loan after bankruptcy.
How Much Can You Borrow?
The VA lets you borrow up to 100% of your home’s VA appraised value, and that limit includes the funding fee. Up to $6,000 of energy-efficient home improvements can be added on top of the value in some cases. There is no VA maximum loan amount for veterans with full entitlement, though your lender sets its own ceiling. If you need a very large loan, see our page on jumbo VA loans.
Here is a simple example. Your home appraises at $350,000 and you owe $200,000. The VA allows a loan of up to $350,000, including the funding fee. After the loan pays off your $200,000 balance and covers your closing costs and the funding fee, the rest can come to you as cash. Your lender can run exact numbers for your situation.
What a VA Cash-Out Refinance Costs: VA Funding Fee, Appraisal, and More
A VA cash-out refinance has three main costs: the VA funding fee, the appraisal, and the usual closing costs like title work and lender fees. The funding fee is the biggest, but you can roll it into the loan as long as the total stays at or under 100% of your home’s value. The VA also caps some lender charges, so the costs are more predictable than on many other loans. Here is what to expect.
- VA funding fee: 2.15% of the loan amount for first-time use and 3.3% for later use. On a $300,000 loan, that is $6,450 for first use. You can finance the fee into the loan, but the total loan still cannot go above 100% of your home’s value. You may be exempt if you receive VA disability compensation, are entitled to it but receive retirement or active-duty pay, are a surviving spouse receiving Dependency and Indemnity Compensation, or are an active-duty service member with a Purple Heart.
- Appraisal and closing costs: You pay for the appraisal, title work, and lender fees. The VA caps the lender’s flat fee at 1% of the loan amount, and it does not allow certain extra charges such as application, processing, or document fees.
- Discount points: You can pay points to lower your rate, but they cannot be added to the loan as a separate line item on a cash-out refinance. You can use your cash proceeds to pay them.
Rules for Refinancing an Existing VA Home Loan Without Taking Cash Out
If your Type I refinance replaces a VA loan, the VA has a few extra checks to keep you from refinancing for little gain:
- Rate drop. For a fixed-rate loan into another fixed-rate loan, the new rate must be at least 0.5% lower. For fixed into adjustable, it must be at least 2% lower. Moving from an adjustable rate to a fixed rate does not require a drop.
- Payback period. The fees must be earned back through a lower monthly principal and interest payment within 36 months.
- No fees if your payment does not drop. If your principal and interest payment does not go down, the lender cannot charge you closing costs other than taxes, escrow amounts, and the funding fee.
Required Disclosures
For cash-out refinances, your lender must give you a loan comparison and a home equity disclosure within three business days of your application and again at closing. These show how the new loan compares with your old one and how much equity you are using.
Your Next Steps
These steps help you check your eligibility, estimate your equity, and understand your costs before you commit to a VA cash-out refinance. Here is a simple path:
- Decide your goal. Are you after cash, a lower payment, a new loan type, or all three?
- Check your eligibility. Make sure you have your Certificate of Eligibility, or ask us to pull it.
- Estimate your equity. Subtract what you owe from what you think your home is worth.
- Compare rates. See today’s rates and ask us for a side-by-side comparison. Our guide on whether you should refinance can also help.
- Talk to us. We will review your income and credit, order the appraisal, and explain your costs before you commit.
VA Loan Cash-Out Refinance FAQ
Here are answers to the questions veterans ask most about VA cash-out refinances, including how much equity you need, how to move from an FHA, USDA, or conventional loan into a VA loan, how this loan differs from a streamline, and what you can do with the cash.
How much equity do I need for a VA cash-out refinance?
The VA lets you borrow up to 100% of your home’s appraised value, including the funding fee, so you do not need a large amount of equity. But the less equity you have, the less cash you can take out. Some lenders set their own limits, so the amount you can borrow may differ from one lender to another.
Can I refinance an FHA, USDA, or conventional loan into a VA loan?
Yes. That is one of the most common uses. You must be VA-eligible, the home must be your primary residence, and the new loan must give you a net tangible benefit. Dropping monthly mortgage insurance often qualifies.
What is the difference between a VA cash-out refinance and a VA streamline?
A streamline (IRRRL) is only for people who already have a VA loan, and it usually needs no appraisal or income verification. A cash-out refinance can replace any type of loan and can give you cash, but it requires a full appraisal and full underwriting. It also has a higher funding fee: 2.15% or 3.3%, compared with 0.5% for a streamline.
Do I need an appraisal?
Yes. A cash-out refinance always needs a VA appraisal. The appraisal sets the value the lender uses to determine how much you can borrow.
What credit score do I need?
The VA has no minimum credit score. VA lenders can set their own, and some have stricter rules for cash-out loans.
Can I use the cash for anything I want?
Yes. The VA does not require you to explain how you will use the money. Common uses include repairs, paying off debt, and paying for school.
Can I do a cash-out refinance on a rental property or second home?
No. The VA cash-out refinance option is only for your primary residence. You must certify that you intend to live in the home.
How long do you have to wait to get a VA cash-out refinance?
If you are refinancing an existing VA loan, you generally need to wait 210 days from your first payment and have made at least six payments. If you are refinancing a non-VA loan, your lender’s own rules apply.
Can I include a second mortgage in the refinance?
Yes, you can pay off a second mortgage or line of credit with the refinance, as long as the new VA loan ends up in first-lien position.
Can I get a VA cash-out refinance if I have not used my VA loan benefit before?
Yes. You do not need to have a previous VA loan. You do need to be eligible for the benefit, and your first use of the benefit carries the lower 2.15% funding fee.
Can one person be removed from a VA home loan without refinancing due to divorce?
Usually not. A divorce decree decides who keeps the home, but it does not change the loan. Your lender is not part of the divorce, so everyone who signed the mortgage stays responsible for it until the lender releases them or the loan is paid off.
There are two main ways to take someone off the loan:
- Refinance. The spouse who is keeping the home refinances into a new loan in their name only, which pays off the old loan. They need to qualify on their own income and credit. A VA cash-out refinance can do this and can also let them buy out the other person’s share of the equity. Depending on the type, the VA’s streamline refinance generally requires the same borrowers to stay on the loan, so ask your lender before counting on that route.
- Loan assumption. The spouse keeping the home may be able to take over the loan, and the lender can release the other person from liability. The lender has to approve it, and the person assuming the loan must qualify. A VA funding fee of 0.5% applies. If the veteran is the one leaving, the veteran’s VA entitlement can stay tied up in the home until the loan is paid off or a qualified veteran takes it over and substitutes their own entitlement.
If you are going through a divorce, talk to us early. We can check what the person keeping the home qualifies for and tell you which option fits. Because divorce involves legal and tax questions, please also check with an attorney.
What is the downside of a cash-out refinance?
A cash-out refinance can be a smart move, but it is not free money. Here are the main downsides:
- A higher funding fee. The VA funding fee on a cash-out refinance is 2.15% for first use and 3.3% for later use. A streamline charges only 0.5%. You can be exempt if you receive VA disability compensation.
- Closing costs. You pay for an appraisal, title work, and lender fees, similar to buying a home.
- A bigger loan. You are borrowing more against your home, so your balance and your total interest go up.
- Less equity. Taking cash out reduces the share of the home you own. At up to 100% of the home’s value, you can have little or no cushion if prices fall.
- A new rate. If your current rate is lower than today’s rates, refinancing means giving it up. Check the numbers before you trade a low rate for cash.
- A longer payoff. Starting a new loan can restart your timeline, so it may take longer to own the home outright.
- Your home is the collateral. If you cannot make the payments, you could lose the home. Be careful using cash-out money for spending that does not build value, such as paying off debts that you then run up again.
A cash-out refinance often makes sense when you will use the money for something that adds value, like repairs, or to replace much higher-interest debt. If you only need a lower rate, a VA streamline refinance may cost far less. We can compare both for you.
Ready to Explore a VA Refinance? How To Apply
Tell us your goal, and we will check your eligibility, your equity, and your costs. Apply online or call 262-305-0680. You can also read about the benefits of a VA loan, our VA loan program, or our other refinance loan options.
Important Disclosures:
VA Cash-Out Refinance Example (30-year fixed rate): $350,000 appraised value, $306,450 loan amount (includes $6,450 first-time use VA Funding Fee), 7.625% interest rate, 7.744% Annual Percentage Rate, $2,169 principal and interest payment.
Taxes, insurance, and mortgage insurance will be part of the total monthly mortgage payment but are not included in the above example. This example is for illustrative purposes only and may differ from the current interest rate offered. Call for the current rate and full disclosure of current terms.
Union Home Mortgage is not acting on behalf of or at the direction of VA or the Federal Government. These materials are not from VA and were not approved by VA or a government agency.
VA funding fee rates are federally mandated and subject to change. Individual exemption eligibility is determined under Federal guidelines. Funding fee amounts in this article reflect rates in effect for loans closing in 2026. Verify your specific rate, fee tier and exemption status using your Certificate of Eligibility and a licensed approved lender.
The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above.
Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice please consult an appropriate professional in one of these fields.
